Energy Efficiency and the Rebound Effect (CRS Report for Congress)
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| Release Date |
Nov. 19, 2001 |
| Report Number |
RL31188 |
| Report Type |
Report |
| Authors |
Frank Gottron, Resources, Science, and Industry Division |
| Source Agency |
Congressional Research Service |
Summary:
Several measures in the 107th Congress seek to increase energy efficiency as a means to decrease
dependance on foreign oil, cut electricity demand and to curb both air pollution and greenhouse gas
emissions. However some claim that these measures may not be as effective as projected because
of the rebound effect.
By definition, increasing a device's energy efficiency decreases its consumption of energy.
However, a simple projection may overestimate the energy savings unless it accounts for the
consumer's response to lower costs. For example, a company that doubles the efficiency of an
electric home heating system projects that the cost of operating this device should be cut in half. But
now that it is cheaper to heat his house, the consumer may choose to increase the setting on his
thermostat. Instead of saving the money and reducing the demand for electricity which the increased
efficiency would allow, the consumer may choose to spend some of the money saved to live at a
more comfortable temperature. This is an example of the rebound effect.
The rebound effect is defined as the difference between the projected and the actual savings due
to increased efficiency. It is a combination of three components: direct effects, indirect effects, and
market or dynamic effects. The home heating example cited above is an example of the direct effect.
An example of the indirect effect is the consumer choosing to spend the savings from a more
efficient home heater to purchase another electric device such as a new hair dryer. The market or
dynamic effect occurs when a decrease in aggregate demand causes the energy price to fall. This,
in turn, makes new uses economically viable or increases the market penetration of existing devices,
driving up demand. An example of this is the introduction of a more efficient coal burning engine
used in the extraction of coal in the mid-1880s. The new engine was predicted to reduce overall
consumption; however, its use greatly lowered the price of coal. Thus more people could afford to
use coal heat in their homes, which greatly increased demand.
The size of a rebound depends on many factors, including the type of device being improved,
energy prices, consumer income, and the overall state of the economy. For typical consumer
end-uses, the rebound usually ranges between 0% and 40%. That is, the actual energy savings ranges
from 60% to 100% of the projected amount.
Policymakers may be able to more accurately gauge the realistic benefits of proposed efficiency
programs by accounting for the rebound effect. For instance, some may consider it desirable
compensate for the rebound effect by increasing appliance efficiency or fuel economy standards even
further than previously suggested. Alternately, others may feel that a lower energy savings estimate
means reduced program cost effectiveness. A third choice would be to slightly lower expectations
of the proposed program.
How the rebound effect changes projected reductions in greenhouse gas emissions is
controversial, although it is generally agreed that increases in efficiency will reduce emissions per
unit of Gross Domestic Product.
