1. Karen Turner, Gioele Figus, Patrizio Lecca, Kim Swales
Reducing Rebound Without Sacrificing Macroeconomic Benefits of Increased Energy Efficiency
Karen Turner, Gioele Figus, Patrizio Lecca, Kim Swales
IAEE International Conference, Bergen June EPSRC grant ref. EP/M00760X/1
Project title: ‘Energy Saving Innovations and Economy-Wide Rebound Effects’

2. What is rebound?
Determined by ratio of actual energy savings to potential energy savings following an energy efficiency improvement
PES generally stated in terms of potential engineering or technical savings
Increase efficiency by 10%, require 10% less physical energy input to produce same level of production output or consumption utility
AES depends on focus – direct rebound just energy use of more efficient user; for economy-wide rebound, AES = all energy use across economy

3. Why economy-wide rebound?
Rebound triggered by fact that reduced physical energy requirement reduces price of delivering energy service
Response to change in price gives us direct rebound
But will trigger series of economic responses (zero rebound – no economic response?)
Our focus – economy-wide rebound
Accompanies productivity or cost push expansion where energy efficiency in production increases
Or demand-led expansion when efficiency in household energy use increases

4. Why does it matter?
Primary aim of energy efficiency policy is to reduce energy use and emissions
But policymakers tend to operate in context of multiple objectives
Likely to welcome economic benefits that drive rebound
But need to know can delivery on energy and emissions targets and commitments
Do we need to live with limited economic expansion if we want to maximise energy savings?

5. Question: can we decouple economy-wide rebound and economic expansion?
Economy-wide rebound driven by same processes as economic expansion
Does this make rebound a necessary ‘evil’?
Can we reduce rebound without sacrificing macroeconomic benefits of increased energy efficiency?
Focus of energy efficiency often simply on the most energy intensive activities
What if we increase energy efficiency in something that is a competitor for a relatively energy-intensive activity?
Focus on service demand and delivery (dematerialisation agenda)

6. For example, public vs. private transport in delivering mobility
Experiment with UK CGE model: increase energy efficiency by 10% in UK ‘Road and Rail’ public (and freight) transport sector
Delivers expected benefits of a productivity led expansion – positive impact on GDP, aggregate investment, employment, exports, household income and consumption
However, expansion accompanied by rebound in energy use across economy

7. New household consumption structure in our UKENVI multi-sector economy-wide CGE model
Key focus of sensitivity analysis
Impact of varying price elasticity of substitution between Private Transport and Road and Rail in household consumption decision
0.5 in central case; vary 0.1→1.1
KEY – MACRO LEVEL IMPACTS ARE NOT SENSITIVE TO THIS PARAMETER

8. Impacts on household decision
When set very low, due to increased income
…and slight decrease in price of refined fuel when demand falls with increased efficiency in Road and Rail sector
…households increase use of both public and private transport
But as elasticity/responsiveness to increase competitiveness of public option increases
…demand for cars and refined fuels falls from outset

9. Key result – we can decouple!

10. Policy implications?
Concern – are cost savings from efficiency improvements in public transport provision passed on through price faced by consumer?
Could we get same result if, e.g. cost savings used to improve quality of service rather than price?
Attractiveness of public option key in any case - how do we get price sensitivity to improve?
But, generally, result suggests
As we make households more willing to substitute in favour of public option
Economy-wide rebound may be reduced while retaining macroeconomic benefits
Key – composition of household transport activity

11. Policy implications?
Would we find similar if focus on efficiency/competitiveness of delivery and/or use of other services?
E.g. Heating: low carbon electricity vs. gas; LPG vs. oil off-grid
Dematerialisation agenda – focus on (not just energy) efficiency and competitiveness of delivery (and use) of low carbon options in delivering energy (using) services to deliver low carbon expansion
With limited, or even ‘good’ rebound?

12. Thank you for listening Questions?
EPSRC project web-site:
Working paper linked to this presentation: