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Why Energy Efficiency Can Increase Energy Consumption in Poor Countries

Michael Shellenberger & Ted Nordhaus .'s picture
Consultants Breakthrough Institute
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  • Oct 16, 2014 8:00 pm GMT
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Pent-Up Energy Demand in Developing Economies Points to High Levels of Global Rebound

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Energy efficiency rebound may not be very high in developed countries, where people are actually driving less and using things like highly efficient lightbulbs. But most of the world isn’t rich. The five billion people around the world who haven’t achieved modern living standards are going to consume more heating, cooling, and lighting as technologies grow more efficient and the price of these services become lower. Both the IEA and IPCC agree with the academic literature that rebound is highest in poor but rapidly developing countries where growth in energy consumption is high — and where the bulk of the 21st century’s carbon emissions will come from. As such, if we are to be serious about reducing greenhouse gas emissions, we need to remain focused on the main event: transitioning to cleaner forms of energy.

Over the last several decades there has been a broad consensus that energy efficiency is a cheap and easy way to reduce carbon emissions. Make our cars and light bulbs more efficient, the thinking went, and energy use will go down. 

But behind the scenes, a growing group of energy researchers were quietly discovering a more complicated reality. In making driving and lighting more efficient — and thus cheaper — people in many situations drove more and used more lighting. Basic economics suggests that a lower price may increase demand — at least sometimes and in some places.

This is the subject of a new Breakthrough Institute report (Lighting, Electricity, Steel: Energy Efficiency Backfire in Emerging Economies), and a new New York Times oped by the two of us in today’s paper.

Our oped praises the Nobel scientists who helped invent ultraefficient LED lighting. LEDs will benefit the world’s poor, and continue to illuminate our televisions, computers, and iPhones. But it would be a mistake to think that energy efficient lighting and similar technologies will dramatically reduce overall global energy consumption. 

To be sure, in rich nations, many of us are actually trying to drive less and turn off our lights. Recent efficiency improvements to cars in the United States, Europe, and Japan are reducing US petroleum consumption. But only modestly. And even here, 75 percent of efficiency improvements in automobiles have been dedicated to greater power, not lower fuel consumption.

Most of the world isn’t rich like us. The five billion people around the world who haven’t achieved modern living standards are going to consume more heating, cooling, and lighting. They are going to own and drive cars. They are going to consume growing quantities of consumer goods. And the nations they live in are going to build modern housing, roads, sewers, and other infrastructure. More efficient technologies will help accelerate all of those trends. 

In Lighting, Electricity, Steel, co-written by Max Luke, Amy Meyer, Harry Saunders, and Alex Trembath, we point to strong historical evidence that more efficient lighting, electricity, and steel production — three major users of energy — allowed for far higher (more than 100 percent) consumption than would have occurred without the efficiency improvements.

Efficient, and thus cheaper, lighting turns out to be very important for human development. It allows factories stay open 24/7. It makes city streets safe for women and children to go to and from work and school. More efficient lighting, like more efficient vehicles, allows developing economies to grow more rapidly.

As such, in those situations, energy efficiency may allow, or encourage, energy consumption to grow. This was the case for today’s rich countries. Over the past two centuries in Britain, the cost of lighting declined by a factor of 3,000.

In response to prodding from leading energy scholars and by Breakthrough Institute, the International Energy Agency (IEA) and the United Nations Intergovernmental Panel on Climate Change have now both formally acknowledged that rebound is likely to be much higher than previously assumed in energy and climate mitigation analyses. 

Rebound effects “cannot be ignored,” IPCC authors wrote in the Panel’s most recent report on mitigation.

To their credit, the IEA and IPCC both acknowledge in their reports what the scholarly literature has long shown, that rebound could be more than 50 percent globally. Both reports note that rebound is highest in poor but rapidly developing countries where growth in energy consumption is high — and where the bulk of the 21st century’s carbon emissions will come from. And IEA even cited Breakthrough’s 2011 literature review, Energy Emergence, in its recent report.

At the same time, in both its modeling of future energy demand, and in its public relations, the IEA continues to grossly misrepresent the size of rebound.

In its 2012 World Energy Outlook, the IEA claims that total rebound from all energy efficiency policies is just 9 percent overall — without accounting for differences across sectors or economies. “I don’t know how they can say that,” Karen Turner, a leading rebound researcher, told the Breakthrough Institute. “A 9 percent average seems too low given what we know about macroeconomic rebound effects,” added another researcher, Steve Sorrell, “as well as the much higher rebound effects in developing countries.” 

With a global rebound rate of 9 percent incorporated into their climate stabilization scenario, which projects carbon dioxide at 450 parts per million, the IEA estimates that various energy efficiency measures will reduce carbon dioxide by roughly 2.3 billion tons per year by 2020 and 7.1 billion tons annually by 2035.

The best available research, however, suggests that rebound is far more significant.

Using macroeconomic models, Terry Barker, an economist and director of the Cambridge Centre for Climate Change Mitigation Research, estimated the total global rebound effect — comprising direct, indirect, and economy-wide rebound — to be 31 percent by 2020, rising to 52 percent by 2030, given all IEA efficiency recommendations are implemented.

Breakthrough’s Alex Trembath found that rebound at the range of 60 percent globally would require vastly more clean energy — the equivalent of 19 Australias worth of clean energy — to meet United Nations targets.    

Over the next century, five billion people are increasingly going to enjoy the modern, high-energy lives most of us take for granted. Perhaps they won’t consume as much energy as we in the developed West consume. But global energy consumption will rise significantly, perhaps as much as three times today’s levels by the end of this century. That will happen even with (and especially with) a lot of energy efficiency. 

As such, if we are to be serious about reducing greenhouse gas emissions, we need to remain focused on the main event: transitioning to cleaner forms of energy.

Photo Credit: Shutterstock (left); Nuru Energy (right)

Michael Shellenberger & Ted Nordhaus .'s picture
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Keith Pickering's picture
Keith Pickering on Oct 16, 2014

Michael and Ted,

TEC (and the Breakthrough Institute) seems to be rebounding all over the place in the last couple of days. At the risk of sounding like a broken record, I would like to reiterate a comment I posted yesterday to Jesse Jenkins’ post on rebound effects.

 I draw your attention to the following very important paper by Timothy J. Garrett, 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%. (It is 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 change104(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.

Jim Kennerly's picture
Jim Kennerly on Oct 18, 2014

I confess that I’ve never seen the relevance of the debate around rebound effects to actual energy efficiency efforts, because on net, it’s practically impossible for an action to be more efficient to turn out *worse* than continuing with business as usual. The folks who seem to think the rebound effect disqualifies efficiency often say “well, but, efficiency can lead to new energy needs and consumption.”

This, to me, is a rather facile point to make, because it misses the point entirely – efficiency makes sense even if rebounds occur, because you’re still reducing a significant degree of potential future energy use. For example, if there’s a rebound effect of 31% (as stated), that means that you’re still getting 69% of the reduced energy related to the actions to become more efficent. What’s more, the rebounded energy use could still be reduced…with more efficiency! 

The thing is, the people who argue against any resource (efficiency, solar, nuclear, wind, gas, etc.) tend to argue against having 100% of our energy be from that resource, and thus are also arguing against a strawman. There’s no serious analyst who thinks any one thing can provide all the energy we need.

 

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