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Are Rebound Effects a Problem for Energy Efficiency?

Jesse Jenkins's picture
Jesse Jenkins 13,916

Jesse is a researcher, consultant, and writer with ten years of experience in the energy sector and expertise in electric power systems, electricity regulation, energy and climate change policy...

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  • Oct 16, 2014
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Rebound Efficiency

The New York Times got the headline wrong in “The Problem With Energy Efficiency,” an October 8th op ed by Michael Shellenberger and Ted Nordhaus, but the authors are right that the rebounds in energy demand triggered by efficiency improvements are real, typically significant, and should force a careful rethinking of the role of energy efficiency in global climate mitigation efforts.

Rebound effects are only “a problem” for energy efficiency if you believe efficiency’s unalloyed goal is to cut energy consumption. But that’s hardly the case.

Think of increased efficiency as an improvement in “energy productivity,” and we would expect and even welcome “rebounds” in demand for energy, just as we do for labor productivity. (No one ever bemoaned a rebound in labor demand following productivity improving factory upgrades, for example!).

Improving the productivity at which we use energy resources simply means we are getting more energy services out of our resources than ever before. That makes energy even more valuable, and it makes perfect since that we would want to make even more use of this valuable resource.

Overall, improving energy productivity is thus great news, regardless of whether it cuts energy use, helps us get even more value out of the same amount of energy use, or some combination thereof. And that is exactly why taking rebound effects seriously should do nothing to undermine the business case for energy efficiency.

If you’ve been following the online kerfuffle over the “Problem” op ed last week and keeping score at home, you’ll know that I’m leveling an explicit critique here at the headline of the column (although the authors themselves did not argue efficiency was “a problem,” and to the contrary, lauded it’s contributions to expanding energy access and fueling global economic productivity and development).

But this is also a clear criticism of those who see efforts to take rebound seriously as a threat and try to dismiss the clear evidence for significant rebound effects at every turn.

Energy efficiency advocates should also take note: don’t build your case for efficiency by arguing its value is solely in reducing energy use. That’s just not how efficiency (aka productivity) works, nor should it be.

I’ve reviewed nearly 100 peer-reviewed and academic articles on the topic, and the consensus is clear: while rebound effects don’t undermine the case for efficiency, taking rebound seriously does force us to rethink the role of energy efficiency in confronting climate change.

The public debate over rebound effects is complicated by the fact that the magnitude of rebound varies from context to context, so it’s difficult to generalize about the scale of rebound, but I’ll try to provide the best summary I can here…

In rich, developed countries, where energy is plentiful and demand for energy services widely fulfilled, rebound effects most likely erode 20-70% of the original energy savings from various efficiency measures. (Even then, there are some outliers on either end of that scale).

According to the Intergovernmental Panel on Climate Change’s survey of the rebound literature included in the 2014 Fifth Assessment Report, “the majority of studies” show rebound effects for end-use energy services like heating, cooling, and lighting, “in the region of 20-45% … meaning that efficiency measures achieve 65-80% of their original purposes.” For transportation, the IPCC notes that “there are some studies that support higher rebounds,” with one study finding rebounds in transportation eroded more than half of the original energy savings. In industry, rebounds can also be significant, with one study finding a range of 20-70 percent across various industries.

Those figures are for the immediate rebound in demand for more efficient energy services (aka the “direct rebound”), and they do not include more indirect effects, such as the impact of spending any energy savings on other energy-consuming goods or services or the impact of improving energy productivity on economic growth (and thus energy use) nationwide. Add those factors in, and the total impact of rebound on overall energy demand rises further.

Yet when we think about the importance of rebound effects for climate strategies, the real story is in the developing world. More than 90 percent of energy demand growth over the next two decades will be fueled by the world’s emerging economies, and that’s where demand for energy services is far, far from saturated.

As the IPCC reports, there is thus “evidence to support the claim that rebound effects can be higher in developing countries.”

In the studies I’ve reviewed of rebound after end-use consumer energy services in developing nations (and there are comparatively few for the developing world, a gap that should be a major research priority), the direct rebound effects alone were much higher than in richer nations, on the order of 40-80%.

We should expect – and welcome! – larger rebounds in developing economies, because demand for energy services is far from saturated, demand is far more elastic (responsive to changes in price), and the cost of energy services is often a key constraint on the enjoyment of energy services.

Since expanding the supply of energy services is also a key constraint on economic activity in developing nations, the macro-economic impact of efficiency improvements in developing economies is also likely to be more significant, helping developing economies grow faster (and thus consume more energy).

This is exactly what Shellenberger and Nordhaus argue in the Times, as they ask us to consider the way ultra-efficient LEDs might “allow poor people to bring modern lighting into their homes much faster than they otherwise would. And … result in faster growth in energy demand globally.”

So how big a deal are rebound effects overall for global climate mitigation efforts?

The best study I’ve seen on this question is by University of Cambridge climate researcher Terry Barker and colleagues. They reanalyzed an efficiency plan from the International Energy Agency and found that rebound effects would erode 52 percent of the energy demand reductions by 2030. By downplaying rebound effects — the I.E.A. assumed rebounds were only about 10 percent — the influential agency overstated the contribution of efficiency to its climate plans by 88 percent.

There’s also reasons to believe this paper underestimates rebound effects overall. Most importantly, they assume the same, fairly modest degree of direct rebound for rich and poor countries alike, and that’s a poorly supported assumption. So consider this a conservative estimate. The real scale of global rebound from the kind of efficiency measures included in most climate plans is likely to be higher then, perhaps eroding 60 percent or more of expected energy reductions.

To quote my favorite Vice President, that’s “a big f-ing deal.”

The I.E.A. counts on efficiency to deliver the largest share of carbon dioxide reductions in their climate plan—more than all renewable energy sources combined, for example.

The I.E.A. is far from alone in banking big on efficiency as a climate tool. I recently completed a paper with Peter Loftus, Armond Cohen, and Jane Long that’s been accepted for publication in WIREs: Climate Change later this fall. Our paper reviews 17 global decarbonization scenarios from a range of sources, from individual academics to major international research efforts to environmental groups like Greenpeace and WWF. See the graphic below, which shows the primary energy supply mix for the final year of these scenarios for which the data was available.

rebound effect

Source: Loftus, Cohen, Long & Jenkins (2014), WIREs Climate Change (in press).

Compare the total energy demand in the I.E.A. reference case to each of these scenarios. The gap between total demand in the reference case and each of these other studies is the contribution each plan expects from energy efficiency improvements above and beyond what we would expect in BAU (note that a fair amount of LED adoption and other energy productivity improvements are going to happen as part of any future business-as-usual scenario, precisely because they make such good economic sense!)

Two things are notable:

First, the folks in “Group 4”, including the ones that try to show how we can get to deep decarbonization with renewables alone (i.e., Greenpeace/EREC & Jacobson & Dellucchi) depend on efficiency to keep global energy use from growing at all over the next 50 years, despite massive increases in GDP and 2 billion more people on the planet by then. That’s a heroic assumption, to say the least!

If you take rebound seriously (these studies don’t consider it at all), you quickly come to the conclusion that we really can’t bet the planet on renewables and efficiency alone. A more balanced portfolio is needed, and yes, that means making hard choices about nuclear, carbon capture and storage (CCS), etc…

But taking rebound seriously doesn’t just amount to saying “energy efficiency is imperfect and we can’t get the climate job done with efficiency and renewables alone.”

If you look at all of the other scenarios (except the first EMF22 scenario and Brook study at the top), the energy demand reductions from efficiency are larger than the energy contribution of any single zero-carbon energy source. In many cases much larger. Factoring in a significant rebound effects to most of these scenarios would be like erasing the entire contribution from solar and wind power combined, for example!

Ignoring rebound effects could thus lead global climate efforts to fall far short.

That’s the real motivation for me (and others) to make sure rebound effects are being taken seriously and carefully.

The implications are manifold: we may be significantly underestimating the contributions we need from renewables, nuclear, CCS, etc., and that may affect everything from the allocation of research and demonstration funding to deployment subsidy programs to how we design carbon pricing policies, etc. not to mention how climate advocates allocate their limited political capital and what kind of organizing strategies they adopt.

So let’s be clear: rebound effects are not a problem for energy efficiency. But failing to take rebound seriously would be a huge problem for climate mitigation. And when our planetary future is at stake, that’s a problem we can’t afford to ignore.

Discussions
Keith Pickering's picture
Keith Pickering on Oct 16, 2014

Jesse,

Thanks for a valuable and important piece. I would also draw your attention to the following very important paper by Timothy J. Garrett (not mentioned in your extensive bibliography, perhaps because of timing issues) which examines the thermodynamics of civilization as a whole, and formally proves, from thermodynamic considerations, that the rebound effect of energy efficiency cannot be less than 100%. (And your suspicions are correct: it is those secondary rebound effects, like economic growth, that are the final extinguishers of all reductions in energy use.)

Garrett, T. J. (2011). Are there basic physical constraints on future anthropogenic emissions of carbon dioxide?. Climatic change, 104(3-4), 437-455.

Readers of the above paper are cautioned that Garrett’s symbol for energy efficiency, epsilon, is different from feedback efficiency eta, the latter being equivalet to rate of return or economic growth. The key point is found in equation 2, where Garrett comments, rather offhandedly for such an important result, “Note that, perhaps counter-intuitively, higher energy efficiency ε corresponds to higher values of η, and therefore more rapidly exponential evolution of energy consumption a and heat production a − w“.

The takeaway point of Garrett’s result is that efficiency simply will not work as a strategy for emissions reductions. There is only one viable path open to us: we must decarbonize our economy, and rapidly.

Keith Pickering's picture
Keith Pickering on Oct 15, 2014

David,

Do you not consider Garrett’s thermodynamic formulation to be a falsifiable hypothesis?

Jesse Jenkins's picture
Jesse Jenkins on Oct 16, 2014

Hi David,

First off, you should probably recheck your “quick calculation” that “were 100% rebounds [sic], then efficiency policy alone could double economic growth in the U.S. over the next 20 years.” Last I checked, energy expenditures were a small fraction of U.S. GDP, on the order of 7-8 percent. So if we doubled the efficiency (i.e. productivity) of all energy consumption in the U.S., and 100% of the resulting gain in welfare was taken as an increase in GDP while energy consumption was held constant, then U.S. GDP would grow by about 3-4 percent as a result. But 3 percent, 100 percent, what’s the difference?

You claim you aren’t actively trying to dismiss the consensus that rebound effects are typically significant. Yet you claim in your October 9th article at NRDC’s blog that “rebound effects are very small where they exist at all.”

That would be news to the IPCC Working Group III, which surveyed the peer-reviewed literature and concluded that “rebound effects cannot be ignored.” Here’s how they summarize the reams of literature on this, which you are so quick to shrug off:

“A comprehensive review of 500 studies suggests that direct rebounds are likely to be over 10% and could be considerably higher (i.e., 10% less savings than the projected saving from engineering principles). Other reviews have shown larger ranges with (Thomas and Azevedo, 2013) suggesting between 0 and 60%. For household‐efficiency measures, the majority of studies  show rebounds in developed countries in the region of 20-45% (the sum of direct and indirect rebound effects). … . For private transport, there are some studies that support higher rebounds, with Frondel et al.(Frondel et al., 2012) findings rebounds of between 57 and 62%. 

There is evidence to support the claim that rebound effects can be higher in developing countries (Wang et al., 2012b; Fouquet, 2012; Chakravarty et al., 2013). Roy (2000) argues that rebound effects in the residential sector in India and other developing countries can be expected to be larger than in developed economies because high‐quality energy use is still small in households in India and demand is very elastic (van den Bergh, 2010; Stern, 2010; Thomas and Azevedo, 2013).” 

As I noted, the studies they are summarizing here exclude any macroeconomic rebound effects. Those are of course difficult to observe empirically, so you’d be happy we just pretend they don’t exist. But when it comes to studying complex real-world phenomona for which we can’t run controlled experiments (say, the global climate, or the economy), we tend to rely on models to form intuitions, develop hypotheses, and come up with our best guesses for what the world looks like. When those findings are inconvenient for you, you’d better come up with a better argument than “BUT: MODELS,” or we might start thinking you really are trying to ignore rebound effects. You sound an awful lot like a skeptic of anthropogenic climate change when you make remarks like that…

Jesse

Jeffrey Miller's picture
Jeffrey Miller on Oct 16, 2014

Excellent article Jesse. Based on your analysis of the rebound effect- especially as it applies to the developing world, it would seem that the most plausible of the 17 scenarios in your bar chart are those in Group 1 – the ones that rely the least on efficiency gains and so are least subject to severely underestimating the rebound effect. Of the three scenarios in Group 1: business as usual (mostly fossil); mostly coal with lots of CCS; and last mostly nuclear with a fair amount of non biomass renewables, it’s difficult to see how we don’t end up with the first – mostly fossil with no CCS, given that we are currently doing almost nothing on the nuclear or the CCS front.

This article also highlights, in yet another context, the insanely delusional nature of plans based primarily on efficiency and renewables. It’s ironic that the groups that care the most about climate change are also the ones that work the hardest to ensure that effective actions – like massive immediate investments in nuclear – are not taken. They do this with a constant negative stream of articles about how expensive and dangerous nuclear is and they do it, perhaps even more effectively, by spinning an endless stream of fables and fairy tales to lull the public into believing that we can decarbonize cheaply and effectively with renewables and efficiency alone. I wonder if these groups will ever face up to the total ineffectiveness of their plans or whether they will stick with their delusions until it is too late, and, combined with the equally dangerous climate change denial on the right, doom our descendants to a much less hospitable climate. I fear that the rapid and accelerating growth in world carbon emissions suggests the latter possibility is the most likely. 

donough shanahan's picture
donough shanahan on Oct 16, 2014

Jesse

I am always confused by people who talk about rebound effects. The rebound is not the problem. In fact we should not even be looking at a rebound. In the UK various household appliances introduced over 50 years ago still have to undergo a rebound like wet, cold and cooking appliances. The former two are still growing in their overall energy use despite large increases in efficiency. The latter is flat with the same (since 1970).

To look at the rebound question is to ignore the massive growth question hat may never result in a rebound at all. Rebound in that sense pales into conplete insignificance. 

Energy Consumption in the UK (2013), Chapter 3, Domestic energy consumption in the UK between 1970 and 2012

Keith Pickering's picture
Keith Pickering on Oct 16, 2014

Donough,

I think you’re looking through the wrong end of the telescope here. Efficiency is always good in the economic sense, that’s not disputed. The question is whether efficiency actually does, or does not, reduce overall demand for energy, after accounting for the greater amount of use that efficiency causes (primary rebound) and also after accounting for the overall economic growth that efficiency causes (secondary rebound).

I would argue, based on Garrett’s work (discussed elsewhere on this thread) that efficiency does not (indeed cannot) reduce overall energy demand. That being the case, it is incorrect for energy planners to use the prospect of greater energy efficiency in the future as a means for reducing energy use. It’s not going to happen, because the world doesn’t work that way. The only way to reduce carbon emissions is to switch  to non-fossil energy sources.

Max Kennedy's picture
Max Kennedy on Oct 16, 2014

Overall a good artical.  The only critique I would have is the initial premise of equating efficiency with production.  There is certainly an element of this, it may even be the primary element though I cannot find evidence of this myself (will admit the search has been short and it isn’t my field) but I believe the concern with rebound is the frivolous use of energy.  As a simple example consider air conditioning an older home.  Put in a new conditioner which uses less electricity to maintain a given temperature but turn the thermostat down from perhaps 23C to 20C thereby using the same energy or more for little if any real gain.  This is wasteful.  Yes there may be circumstances where there is a medical necessity but that is a rarity not part of this example.  An example of increased productivity would be reducing the cost of making aluminum thereby making less rich ores economic and thus increasing the supply of the material.  This, depending on other factors such as the environmental imprint of accessing the new ore body, may indeed be beneficial.  If there is information on the relative uses of energy in rebound I would appreciate being directed to it.

John Wilson's picture
John Wilson on Oct 16, 2014

Its great to see that the Breakthrough Institute and friends have moderated their messaging. It was a real shame when certain findings were extrapolated to suggest that energy efficiency does not save energy. This more nuanced and thoughtful discussion is a real contribution to sound work. But I wouldn’t put all the blame on the New York Times for the headline, they probably just looked back at some of BTI’s original messaging on this subject.

donough shanahan's picture
donough shanahan on Oct 17, 2014

Keith

“The question is whether efficiency actually does, or does not, reduce overall demand for energy”

That is what I am after. The rebound affect only comes into play when energy demand is not growing.

What I am saying is that all of this focus on rebound is completely wrong. The data I show says that there has been no decline in the overall energy use of many appainces in the UK home over the last 50 years. In fact it has increased rapidly. So even though the efficiency of these appliances is increasing, this is having little to no effect on the overall energy use. In affect we are getting a negative rebound.

We are not seeing energy reducing by say 2% when it should be 5%, we seeing huge energy increases when efficiency has increased by over 50%. In fact the only data set we can use for the UK is lighting (maybe cars as well).

The rebound affect is only valid once the energy use is full developed i.e. it is no longer growing. If this is not the case for much of the UK domestic scene, then it is hardly going to be the case for growing third world countries. 

Keith Pickering's picture
Keith Pickering on Oct 17, 2014

As mentioned previously iin this thread, the reference is:

Garrett, T. J. (2011). Are there basic physical constraints on future anthropogenic emissions of carbon dioxide?. Climatic change, 104(3-4), 437-455.

In this paper, Garrett considers civilization as a whole to be a thermodynamic engine, which runs via a feedback loop (the economy). The feedback efficiency of this loop is expressed as the variable η, which is equivalent to economic rate of return, or rate of economic growth. The key point is found in equation 2, not fully reproducable here, but part of it is: 

αw = αεa ≡ ηa

… where w is work done by the system (civilization), ε is energy efficiency, α is a system-wide availability constant, and a is the rate of energy consumption.

Garrett comments, “Note that, perhaps counter-intuitively, higher energy efficiency ε corresponds to higher values of η, and therefore more rapidly exponential evolution of energy consumption a and heat production a − w”.


Jesse Jenkins's picture
Jesse Jenkins on Oct 21, 2014

David,

Your example only holds if you assume the only form of rebound is a specific indirect rebound mechanism, which is knonwn as the “re-spending effect,” wherein energy savings are spent on a general bundle of consumer goods, which then have the average energy intensity of the economy as a whole. (For a taxonomy of rebound effects, see here). Indeed, no one predicts indirect rebound effects to add much more than another 5-15% on average to the overall rebound effect, as I wrote in my extensive 2011 review of the rebound literature.

What you are of course ignoring is the direct rebound effect (as well as several other indirect mechanisms), wherein an improvement in the efficiency of an energy service reduces the apaprent cost of that service, triggering an increase in demand for that service. Now where energy services are concerned, of course they are much more energy intensive than the economy as a whole. So if we make lighting (about 70-80% energy cost to total cost of lighting ratio BTW) or a blast furnace at a Chinese steel mill, or freight trucking, or an industrial motor at a factory more efficient, direct rebounds in energy demand can be far more significant than the overall energy intensity of the economy indicates. That’s why the literature on each of these cases shows much larger rebounds than you want to acknowledge.

 

And again, the fact that energy is a relatively small share of total US GDP does not at all imply that rebound effects are small. If energy expenditures are 8 percent of US GDP, and we make all energy services twice as efficient over the next 20 years, as in your example, then that implies we just made 8 percent of the US economy twice as productive over 20 years. That would grow the U.S. economy by 4% over that 20 years, or 0.19 percent per year increase in U.S. economic growth rate over those 20 years, if we assume these gains scale smoothly. Now that would be a nice welcome boost to U.S. GDP, but two orders of magnitude less than your “simple” (and flawed) example above.

Now what does that mean for the scale of rebound? Well let’s assume for sake of argument that we are in a rich nation like the U.S., so direct rebounds are in the 20-70 percent range we see across empirical studies for the U.S. (see links in my original article). Let’s use 50 percent as an easy middle of the range figure for the average rebound. In that case, instead of shrinking to 4 percent of U.S. GDP, energy expenditures would only shrink to 6 percent, as half of our energy savings are eroded by direct rebound. Then if the economy as a whole grows by 4 percent and we spend 6 percent of GDP on energy-related expenditures now on average, we would spend an additional 0.24 percent of our original, pre-efficiency GDP level on energy. That would erode another 6 percent of the expected total energy savings (0.24 percent of GDP / 4 percent of GDP original energy savings = 6 percent of original energy savings). Our total rebound in this case would be 56 percent. 

That’s a lot of multiplying percents, so go ahead and check my math, but the logic there is sound, and corrects the clear errors in your simple attempt to disprove the possibility of very large rebounds.

Now transplant this case to the developing world, which is less efficient, and where energy use is more like 12 percent of GDP. Say we get 50 percent more efficient there as well over 20 years, leading to a 6 percent increase in GDP over 20 years, or 0.29 percent boost in the growth rate.

Now let’s assume direct rebound effects in the developing world are closer to 75 percent on average (again see evidence discussed in the original post). Then instead of cutting energy expenditures in half to 6 percent of GDP, we lose 4.5 percentage points of that savings to direct rebound (6 percent * 0.75), and we wind up still spending 10.5 percent of GDP on energy. With GDP now also 6 percent higher, the indirect rebound from this macroeconomic growth and respending is 0.63% of our original GDP or an indirect rebound of 10.5 percent of our original energy savings (0.63 percent / 6 percent = 10.5 percent). Total rebound in this case is north of 85 percent. 

These are all hypothetical, rebounds for very large, economy-wide efficiency improvements. Of course the sector and country-specific cases will differ. But I hope you see why the small share of the economy spent on energy in no way implies that rebound effects are small. 

Your continued insistance that they must be small, despite mounting evidence to the contrary, as well as the admonishions of the IPCC, is unfortunate. As I noted above, the evidence does not support the idea that backfires are the norm. Nor are they impossible or even particularly rare. My 2011 review of the literature made that quite clear.

However, the evidence also pointedly does not support the idea that rebounds “where they are found, are quite small,” as you claim. As my original article notes, rebounds in the 35-80 percent range are still a very big deal for energy planning and climate mitigation. Please stop trying to imply otherwise.

Finally, your claim that the evidence for rebound effects is not empirically grounded or is based on non-testabable hypotheses is belied by the massive amount of literature on the topic. Just search Google Scholar for “rebound effect, energy, empirical” and have fun reading the reams of papers on this, which you seem to have completely missed…

I suggest you start with these three recent examples:

 

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