Energy efficiency improvements often do not deliver reductions in energy use. For example, when a householder installs better insulation, the energy savings are sometimes much less than would have been predicted. Sometimes this is because the insulation was badly fitted, but it is often because the householder runs the heating at a higher temperature when the house is better insulated. This is called the ‘rebound’ effect: when it becomes cheaper or more effective to use energy, people use more of it.
The many studies into this effect have produced a wide variety of different estimates for the size of this effect. Most cluster between 10 and 30%. This means that energy efficiency improvements generally result in a large net benefit. But these studies only capture the direct effect on consumers and businesses. A study from the UK’s Energy Research Centre shows that the economy-wide impact may be much larger. For example, lower heating bills may mean that householders are rich enough to take more flights. At an even higher level of abstraction, better economy-wide energy efficiency (through, say, improvements in steel-making technologies) may encourage more rapid economic growth, which in turn raises energy use.
Some economists think that the economy-wide rebound from energy efficiency gains is very large – perhaps over 100%. A figure over 100% suggests that total energy consumption rises after energy efficiency improvements. The tentatively stated view of a new report by the UK Energy Research Centre is that the true number is somewhat lower than this and may be around 50%, although it could be a great deal higher.
Government projections for the impact of energy saving measures never take the rebound effect into account. Policy-makers trying to reduce global emissions need to adjust their thinking to reflect the much lower than expected efficacy of energy saving programmes.
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