[Post author: Rick Yoder, P2RIC]
The benefits of energy efficiency policies have been questioned by various media organizations and think tanks due to a phenomenon called the “Rebound Effect”, also known as Jevon’s Paradox. The Rebound Effect is the idea that consumers and businesses have incentives to spend the money saved from energy efficient strategies on the same or other energy consuming products or services, paradoxically increasing energy use because of energy savings. According to The Breakthrough Institute (BTI), macroeconomic Rebound Effect accounts for 30%-50% or more energy consumption and sometimes even greater than 100% (known as “backfire”) of the original amount of energy consumption saved. Rebound raises questions about the impact that energy efficiency policies have on the total energy use in all industries. If true, it has serious ramifications to the work being conducted to mitigate global GHG emissions and to the efforts of the Pollution Prevention (P2) community.
Last year several articles volleyed the value of Rebound – most notably The Rocky Mountain Institute, Joe Romm and others at Climate Progress in a response to the report by the The Breakthrough Institute. This year, a report conducted by Shakeb Afsah, Kendyl Salcito and Chris Wielga at co2scorecard.org stirred the discussion once again, followed by an article on Grist. The discussion provides the P2 community with a more nuanced understanding of the potential savings of source reduction recommendations and provides evidence to support efficiency strategies.
P2 professionals ought to consider a trip down the Rebound rabbit hole for several reasons. First, the P2 community stays credible by staying engaged. If one drills through the contentious nature of the Rebound blog posts, it’s clear that the arguments are not about whether Rebound occurs, but at what level. At its core, that makes the Rebound discussion one about measurement – how large are the gains claimed by those working in resources efficiency? It’s fair to consider Rebound as a loss much like friction modifies the ideal laws of motion. And it’s fair to expect the P2 community to be interested in whether the Rebound loss is trivial or sizable. Even a brief look at the academic literature listed below makes it clear that efficiency measurements based on expected savings will likely fail to accurately report actual resource consumption rates. Measurements that forecast savings without considering Rebound are a little like projecting savings with a Simple Payback calculation – it’s ok as a first approximation, but it’s not considered a complete calculation – Simple Payback often ignores cash flows received after the payback period and typically does not recognize the time value of money.
The second reason for P2 professionals to notice the Rebound discussion is that it highlights the critical importance of considering social and behavioral science and that a focus through technology blinders is limiting. The Rebound premise recognizes that waste comes not only from technological change, but also from the actions, decisions, and behaviors of individuals and organizations. The P2 professional who wants to stay active in a world focused on the sustainability challenge will need to be proficient in both technical change and behavioral change.
Lastly, P2 policymakers should recognize the relationship of Rebound information with the mandates of the 1990 P2 Act (PPA). Congress told the EPA Administrator in the PPA to use grants “…to promote the use of source reduction techniques by businesses.” Among other things, it says, grant funded programs should “[t]arget assistance to businesses for whom lack of information is an impediment to source reduction.” Certainly the information about whether and how much Rebound can impact resource consumption is information which can impede ultimate source reduction success.
More potential discussion topics surrounding Rebound exist for technical assistance providers, program managers, and policy makers than this author has time to cover in one post. Some of the bright young economists at UNO College of Business Administration (CBA) have posited interesting research to add to the mix. I hope you’ll look a little bit further into Rebound, as it seems to be an annual topic of interest which generates significant give-and-take.
Bibliography of Papers on Rebound
Ahmad, Mobin-ud-Din, Hugh Turral, Llyas Masih, Mark Giordano and Zubair Masood. 2007. Water Saving Technologies: Myths and Realities Revealed in Pakistan’s Rice-Wheat Systems. Colombo, Sri Lanka: International Water Management Institute.
Alcott, Blake. 2005. Jevons’ paradox. Ecological Economics. 54: 9-21.
Birol, Fatih and Jan Horst Keppler. 2000. Prices, technology development and the rebound effect. 2000. Energy Policy. 28: 457-469.
Gomez-Baggethun, Erik, Rudolf de Groot, Pedro L. Lomas and Carlos Montes. 2010. The history of ecosystem services in economic theory and practice: From early notions to markets and payment schemes. Ecological Economics. 69: 1209-1218.
Hertwich, Edgar G. Consumption and the Rebound Effect. Journal of Industrial Ecology. 9: 85-98.
Huffaker, Ray and Norman Whittlesey. 2003. A Theoretical Analysis of Economic Incentive Policies Encouraging Agricultural Water Conservation. Water Resources Development. 19: 37-53.
Llop, Maria. 2007. Economic impact of alternative water policy scenarios in the Spanish production system: An input-output analysis. Ecological Economics. 68: 288-294.
Lorentz, Andre and Julia Sophie Woersdorfer. 2009. ‘Energy-efficient household appliances and the rebound effect – A model on the demand for washing machines’. Working paper.
Madlener, Reinhard and Blake Alcott. 2009. Energy rebound and economic growth: A review of the main issues and research needs. Energy. 34: 370-376.
Negri, Donald H. and Douglas H. Brooks. 1990. Determinants of Irrigation Technology Choice. Western Journal of Agricultural Economics. 15: 213-223.
Peterson, Jeffrey, M. and Ya Ding. 2005. Economic Adjustments to Groundwater Depletion in the High Plains: Do Water-Saving Irrigation Systems Save Water? American Journal of Agricultural Economics. 87: 147-159.
Pfeiffer, Lisa and C.-.Y Cynthia Lin. 2010. Does Efficient Irrigation Technology Lead to Reduced Groundwater Extraction?: Empirical Evidence. Working Paper.
Polimeni, John M. and Raluca Iorgulescu Polimeni. 2006. Jevons’ Paradox and the myth of technological liberation. Ecological Complexity. 3: 344-353.
Roy, Joyashree. 2000. The rebound effect: some empirical evidence from India. 28: 433-438.
Ruzzenenti, F. and R. Basosi. 2008. The role of the power/efficiency misconception in the rebound effect’s size debate: Does efficiency actually lead to a power enhancement? Energy Policy. 36: 3626-3632.
Saunders, Harry D. 1992. The Khazzoom-Brookes Postulate and Neoclassical Growth. The Energy Journal. 13: 130-148.
Sorrell, Steve and John Dimitropoulos. 2008. The rebound effect: Microeconomic definitions, limitations and extensions. Ecological Economics. 65: 636-649.
Sorrell, Steve, John Dimitropoulos and Matt Sommerville. 2009. Empirical estimates of the direct rebound effect: A review. Energy Policy. 37: 1356-1371.
Thomas, Brinda A. Estimating the U.S. Economy-wide Rebound Effect. Carnegie Mellon University, 2011
Ward, Frank A. and Manuel Pulido-Velazquez. 2008. Water conservation in irrigation can increase water use. PNAS. 105: 18215-18220.