On the rebound: countering the sceptics

The rebound effect

Does energy efficiency lead to energy use that offsets some of the savings, via a ‘rebound effect’? It’s not that simple, says Alan Pears, and in fact, the opposite can happen.

MANY ‘energy efficiency sceptics’ argue that saving energy simply leads to increased energy use that offsets the savings. Some go as far as suggesting energy efficiency is a waste of time and a sham.

Indeed, there is a large body of literature that documents the existence of a ‘rebound effect’. But there is wide disagreement about how large it is—estimates range from a 10% to 70% reduction in net savings. Studies find that the extent of this rebound varies across sectors and activities.

On the other hand, other studies have shown that estimates of potential savings from energy efficiency policies have often been conservative, and costs have been over-estimated. For example, recent analysis of the effectiveness of Australia’s appliance efficiency programs, using improved field data and analytical methods, increased the estimated benefits by a factor of two (as measured by cost per tonne of avoided carbon).

The International Energy Agency has shown that, if the multiple benefits of business energy efficiency measures are considered, total savings can be up to 2.5 times the value of the actual energy saved. These benefits can include productivity improvement, health benefits, reductions in costs in infrastructure and more.

Like many issues, the rebound effect has an element of truth underpinning it. But, overall, it is not a game changer. Indeed, with the right policy settings and in many situations, investment in saving energy can amplify overall energy savings. This article aims to unravel the story.

What is rebound?
The term ‘rebound effect’ itself reflects a bias against valuing energy efficiency. It implies that some or all of the claimed savings from energy efficiency are inevitably taken back through increased energy use. This can certainly occur, but the opposite, amplification of savings, can also occur. The outcome depends on the policies, the behaviour of decision-makers, and the technical detail.

Broadly, the critical factors influencing the size and direction of the overall change in energy use due to energy efficiency improvement are how big the financial savings are, how they are spent, the overall impact of that spending as it flows through the economy, and technical system effects.

A more balanced term might be ‘flow-on effect’.

Consider an extreme example. If I use the money I save through energy saving actions to buy a block of energy-intensive aluminium, overall energy use may increase, as more energy will have been used to produce the aluminium than I am likely to have saved. But if I invest my savings in more energy saving actions, or to support the growth of an energy saving industry, I will amplify the energy savings.

In practice, the overall outcome is difficult to estimate: if the aluminium I buy is used to reduce the weight of a car, the fuel savings may exceed the lifetime energy ‘cost’ of the aluminium—if I believe the aluminium industry’s research! And, if the aluminium is eventually recycled, up to 90% of the energy ‘invested’ in its production will be recovered, reducing future energy consumption.

Read the full article in ReNew 134.