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Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
Chasing Our Tails? Rebound effects from improved energy efficiency
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Chasing Our Tails? Rebound effects from improved energy efficiency

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Seminar talk from Steven Sorrell (University of Sussex) at Centre for Climate Change Economics and Policy (CCCEP): http://www.cccep.ac.uk

Seminar talk from Steven Sorrell (University of Sussex) at Centre for Climate Change Economics and Policy (CCCEP): http://www.cccep.ac.uk

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  • 1. Chasing our tails? - Rebound effects from improved energy efficiencySeminar at the School of Earth and Environment, University of Leeds, 16th Nov 2011 Steve Sorrell Sussex Energy Group, University of Sussex, UK s.r.sorrell@sussex.ac.uk
  • 2. Topics• Defining and measuring rebound effects• Rebound effects for consumers• Rebound effects for producers• Jevons Paradox• Summary and implications
  • 3. Defining and measuring rebound effects
  • 4. Rebound effects - consumersIndirect Lower Holiday gasoline in SpainEmbodied energy bills More energy Less energy Lower More energy Driver further running or more often costs Direct
  • 5. Reinforcing rebound effects!
  • 6. Rebound effects - producersIndirect Lower MoreEmbodied cost cars car energy travel More energy Less energy Lower More energy More steel cost production steelDirect
  • 7. Economy-wide rebound effect Actual energy savings Estimate of energy savings Indirect rebound effects Economy-wide rebound effect Direct rebound effect
  • 8. A polarised debate “The concept of a nontrivial rebound “With fixed real energy prices, energyeffect…..is without basis in either theory or efficiency gains will increase energy experience. It is, I believe, now widely consumption above what it would be accepted to be a fallacy whose tedious without these gains)” (Saunders, repetition ill serves rational discourse and 1992) sound public policy” (Lovins, 1988) Quantification hampered by inadequate data, uncertain causal relationships, endogenous variables and complex, long-term dynamics Existing evidence base only captures a subset of effects in a limited number of countries/sectors over limited periods of time
  • 9. Defining an energy efficiency improvement• Energy efficiency may be measured in a variety of ways for a variety of system boundaries• Sources and consequences of changes and hence rebound effects will vary with the measure chosen• Example: If energy efficiency policy reduced the US energy/GDP ratio by 30%, GDP would need to grow by 55% to offset the energy savings. But rebound effects may prevent the energy intensity reduction
  • 10. Isolating an energy efficiencyimprovement• Energy efficiency improvements rarely occur in isolation – new technologies provide multiple benefits• Rebound effects need not be small just because the share of energy in total costs is small – and win-win improvements will have bigger rebound effects• Example: Mean payback for 52 energy efficiency projects fell from 4.2 to 1.9 years when non-energy benefits taken into account• Example: green commercial buildings improved labour productivity by 16% (labour costs ~25*energy costs)
  • 11. Measuring aggregate energy efficiencyimprovements• Aggregate measures of represent 450 400 the net result of multiple variables 350 GDP• Measuring energy consumption on 300 In d e x (1 9 4 7 =1 0 0 ) the basis of thermal content 250 Primary Energy Use amounts to summing apples and 200 Quality Adjusted oranges – and will be misleading 150 Final Energy Use• Economic phenomena require 100 50 economic measures 0• Estimated rebound effects will 1945 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 Year differ if we use carbon or GHGs
  • 12. Rebound effects for consumers
  • 13. Evidence for direct rebound effects forhouseholds• Quasi experimental studies – before & after measurements of energy or energy service consumption following efficiency improvements• Econometric analysis of secondary data - estimates of efficiency or price elasticities for household energy service demand or energy demand• Scope limited by data availability: largely confined to personal transport, space heating and space cooling in OECD households • Convergence in results, despite varying regions, time periods, data types, econometric specifications and measures • Many studies rely upon estimates of price elasticities and could be upwardly biased• Own price elasticity of energy demand provides an upper bound for the direct rebound effect – and is usually less than unity
  • 14. Estimates of direct rebound effects forhouseholds Source: Sorrell (2007)Service Range of Best guess No. of Confidence estimates studiesCar 3 - 87% 10-30% 17 HightransportSpace 1 - 60% 10 – 30% 9 MediumheatingSpace 1 – 26% 1 – 26% 2 LowcoolingOther 0 – 39% <20% 3 Low May decline in future as demand saturates and incomes increase Higher in developing countries Marginal consumers and key variables ignored Long term transformational effects not captured
  • 15. Evidence for direct + indirect reboundeffects for households• Environmentally extended I-O models - energy/carbon/GHG intensities of commodity groups• Systems of consumer demand equations - expenditure, own- price and cross-price elasticities for those commodity groups• Cheaper energy services may lead to increased or reduced demand for multiple commodities with widely varying intensities• Key methodological issues: • Level of commodity disaggregation • National versus multiregional I-O model • Cross-sectional versus time-series data on household expenditure (income effects versus income + substitution effects) • Commodities versus energy services
  • 16. Estimates of direct + indirect reboundeffects for households Author No. Effects Efficiency Area of Rebound categories captured or consumption effects sufficiencyLenzen & Day ? Income Efficiency & Food; heating 45-123% (2002) Sufficiency (GHGs) Alfreddson 300 Income Sufficiency Food; travel; 7-300% (2004) (18) utilities (carbon) Brannlund 13 Income & Efficiency Transport; utilities 120-175% (2007) substitution (carbon) Mizobuchi 13 Income & Efficiency Transport; utilities 12-38% (2008) substitution (energy)Kratena (2010) 6 Income & Efficiency Transport; heating; 37-86% substitution electricity (energy) Chitnis et al 16 Income Sufficiency Transport, heating, 7-51% (2011) food (GHGs)Thomas (2011) 74 Income Efficiency Transport, 7-25% electricity (GHGs)Murray (2011) 36 Income Efficiency & Transport, lighting 5 – 40% sufficiency (GHGs)
  • 17. The importance of indirect energy use and emissions Direct carbon emissions from UK households steady, but indirect and total emissions rising Indirect emissions due to imported goods rising fasterSource: Druckman & Jackson (2009) 17
  • 18. The importance of indirect energy use and emissions Energy Consumption per Household Most countries exhibit a strong correlation by Income, 2002 between total energy use/carbon emissions and 1000 household income – with indirect use of Energy Use per Household 900 Embedded Consumption 800 700 Direct Consumption greater importance for higher income groups Million BTUs 600 500 400 and over time 300 200 100 0 Less $5000 $10,000 $15,000 $20,000 $30,000 $40,000 $50,000 than to to to to to to and $5,000 $9,999 $14,999 $19,999 $29,999 $39,999 $49,999 overSource: Saunders (2010) Wide variation in total energy use/emissions between socio-economic groups, but little evidence for significance of values and awareness, once socio-economic situation is allowed for Source: Vringer et al (2007)
  • 19. Simple ‘sufficiency actions’ –GHG savings for average householdHousehold heating: reduce thermostat by 1oC (10%)Food: reduce food waste by one third (33%)Transport: replace car journeys <2miles by walking/cycling (23%).
  • 20. Estimated rebound effects 2.50 2.00 Expected GHG reductions (ΔH) GHG emissions (tCO2e) 1.50 (tCO2e) 1.00 GHGs due to use of 34% avoided 51% expenditure (ΔG) 0.50 (tCO2e) 25% 7% 0.00 Household Food Travel All actions thermostat
  • 21. Varying the re-spend from the combinedactions 14 12 Rebound 10 515% Expected GHGGHG emissions (tCO2e) reduction (ΔH ) 8 (tCO2e) 6 GHGs due to use of avoided expenditure 4 (ΔG) (tCO2e) 2 Rebound Rebound Rebound 34% 26% 12% 0 Behaviour Worst case Best case 100% as usual investment
  • 22. Simple efficiency actions – GHG savings for average1 UK household 1. Cavity wall insulation 5.9% 2. Top-up loft insulation 1.5% 3. Condensing boiler 5.9% 4. Tank insulation 1.7% 5. CFL lighting 1.2% 6. LED lighting 1.3% 7. 1-5 combined 15.6%1 GHG savings for eligible households divided bytotal number of UK households
  • 23. Baseline – no capital costs, no embodiedenergy, 5-year average 35 30 25 Rebound effect (%) 20 Baseline 15 10 5 0 Cavity wall Top-up loft Condensing Tank insulation CFL lighting LED lighting 1-5 combined insulation insulation boiler
  • 24. Baseline + embodied energy 35 30 25 Reb ound effect (%) 20 Embodied energy 15 Baseline 10 5 0 Cavity wall Top-up loft Condensing Tank insulation CFL lighting LED lighting 1-5 combined insulation insulation boiler
  • 25. Baseline + embodied energy + full capitalcosts40302010 Capital costs Embodied energy Baseline 0 Cavity wall Top-up loft Condensing Tank insulation CFL lighting LED lighting 1-5 combined insulation insulation boiler-10-20-30
  • 26. Baseline + embodied energy + subsidisedcapital costs 35 30 25 20 15 Capital costs 10 Embodied energy Baseline 5 0 Cavity wall Top-up loft Condensing Tank insulation CFL lighting LED lighting 1-5 combined insulation insulation boiler -5-10-15
  • 27. 10 years versus 5 years3025201510 10 years 5 years 5 0 Cavity wall Top-up loft Condensing Tank insulation CFL lighting LED lighting 1-5 combined insulation insulation boiler -5-10-15
  • 28. Planned workVariation of rebound effects by income group • Estimate Engel curves for up to 40 commodities using data from UK Living Costs and Food SurveyCapture of income and substitution effects • Estimate Linear Almost Ideal Demand system using ONS expenditure data for UK households
  • 29. Conclusions on rebound effects for consumers• Evidence base reasonable for direct effects but sparse for combined effects• Direct effects <30% for transport and heating, smaller for most other energy services but larger for low income groups and developing countries• Combined effects variable with complex determinants - estimates range from 5 to 200%, but lower values more plausible• Not capturing economy-wide, long-term and transformational effects
  • 30. Rebound effects for producers
  • 31. Rebound effects for producers• Substitution effect: energy services become cheaper relative to other inputs• Output effect: lowers production costs and therefore price of output encouraging increased demand• Productivity effect: productivity improvements lead to increased incomes, consumption and economic growth• Composition effect: economy shifts towards activities where impact of efficiency improvement is greatest
  • 32. 0% 100% 120% 140% 20% 40% 60% 80% Electric Utilities Transportation Services Chemicals Construction Primary Metal Agriculture Financial Industries Government Enterprises Food & Kindred… Paper & Allied Products Stone, Glass, Clay effects for US producers Machinery, non-… Fabricated Metal Electrical Machinery Lumber and Wood Rubber &… Textile Mill Products stock turnover Motor Vehicles Non-metallic mining Weighted Mean = 62% Long-term Rebound Communications Transportation… Printing, Publishing &… Instruments Apparel Metal Mining Furniture & Fixtures Econometric estimates of direct rebound Misc. Manufacturing Leather Tobacco Estimation of KLEM translog cost functions for 30 US industry sectors over period 1960-2000, including technology gain parameters and allowing for capitalSource: Saunders, 2011
  • 33. Macro-economic modelling estimates ofeconomy-wide rebound effectsOnly a handful of studies, focusing upon different regions and different types and sizes of energy efficiency improvement • 8 CGE studies of economy-wide effects. Smallest result ~37% and four >100% • Macro-econometric model of global economy to 2030 found ~52% for from ‘no-regrets’ policies summarised in IPCC AR4Results sensitive to uncertain assumptions• e.g. varying elasticity of substitution between energy and other inputs from 0.1 to 0.7 increased rebound effect from 7% to 60%Results sensitive to multiple variables• Energy intensity of sector, openness to trade, capital and labour market adjustments etc.• Negative multiplier effects in energy sector
  • 34. Conclusions on rebound effects forproducers• Effect varies widely with the nature and location of the energy efficiency improvement• Problems with methodologies, sensitivity to uncertain assumptions and little systematic investigation• Estimates consistently indicate large effects (> 50%) despite focusing upon ‘pure’ efficiency improvements that neglect associated benefits
  • 35. Jevons Paradox
  • 36. Steam engines in the 19th century Improved efficiency of steam engines Lower cost steam Greater use of steam engines “….It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth…. Every Coal-mining Steel-making improvement of the engine when effected will only accelerate anew the consumption of coal…” cost steel Lower (Jevons, 1865) Lower cost rail transport Lower cost coal
  • 37. General purpose technologies • Potential for substantial improvement • Pervasive across a range of uses, sectors, products and processes • Complementarities with existing or potential new technologies • Diffusion characterised by increasing returns, widespread stimulus to innovation and long- term productivity growth
  • 38. Variability of rebound effects 0% Energy intensive sectors andRebound energy producers Non-energy intensive sectors andeffect (%) households Core process technologies 50% ‘Win-win’ technologies Non-core technologies ‘General-purpose’ technologies ‘Dedicated’ energy efficient technologies Developing countries Developed countries 100% Type and location of energy efficiency improvement
  • 39. Long term rebound - indices of key lightingvariables in the UK 1300-200010000 Light Use/cap, 6567 Efficiency, 1000 1000 Source: Fouquet & Pearson (2006) 100 85 GDP/cap, 15 14.5 10 Light price 2.9 1 1 0.26 Fuel price, 0.18 0.1 Light use per capita 0.042 0.01 0.001 Light Price, 0.00030.0001Page 39 1300 1700 © Imperial College London 1850 1750 1800 1900 1950 2000 ’
  • 40. The world’s appetite for light Consumption 0.72% = US$440B / US$60T•Global analysis over three centuries 6.5% = 1 TWc / 16 TWc•Per capita consumption of light increased 105.4 104by 1.01% for every 1% reduction in the JP+KR 2005 per capita consumption of light AU+NZ 2005 OECD- OECD-EU 2005cost of light FSU 2000 US 2001 UK 2000•Energy ‘’savings’ from improved lighting 101 WRLD- WRLD-DEV 2005 CN 2006 UK 1950 CN 2005efficiency almost exactly cancelled out by CN 1993increased light consumption φ [Mlmh/(per-yr)] UK 1900 WRLD- WRLD-UNDEV 1999•Little sign of saturation in lighting 10-2 UK 1800 UK 1850consumption in developed countries UK 1700 UK 1750•Considerable potential for growth in Tsao and Waide, “The World’s Appetite for Light: Empirical Data and Trends Spanning 10-5 Three Centuries and Six Continents,” to be submitted to LEUKOSconsumption of both lighting and energy 10-5 10-2 101 104for lighting β·gdp/CoL [Mlmh/(per-yr)] 0.0072 $/Mlmh $/(per-yr) Source: Tsao et al (2010)
  • 41. Underlying debates Orthodox perspective Ecological perspectiveSource of Technical change and Increasing availability of high-productivity improvements in labour quality energy, both directly andimprovements quality embodied in capital equipment and technologyMarginal Proportional to share of Greater than the share of energyproductivity of energy in the value of in the value of outputenergy inputs outputInput Considerable scope for Limited scope for substitutingsubstitution in substituting capital for capital for energyproduction energyDecoupling of Has already occurred with Strong link exists and willenergy considerable scope for continue to exist between qualityconsumption further decoupling adjusted energy use andfrom GDP economic outputImplied Small Largerebound effects
  • 42. Len Brookes and ecological economics• “..it is energy that drives modern economic systems rather than such systems creating a demand for energy” (Brookes, 1984)• Improvements in energy productivity are typically associated with proportionately greater improvements in total factor productivity. Latter raises output and increases demand for all inputs.• The resulting increase in demand for energy inputs more than offsets the reduction in energy use per unit of output – so energy efficiency improves while energy consumption increases
  • 43. Conclusions on Jevons Paradox• Theoretical arguments are stylised and often rely upon questionable assumptions• Cited empirical evidence is indirect selective and frequently ambiguous• Backfire not demonstrated to be a universal outcome of energy efficiency improvements• Arguments and evidence should nevertheless be taken seriously• Key issue is the contribution of increasing energy services to productivity improvements and economic growth
  • 44. Conclusions and policy implications
  • 45. Conclusions• Rebound effects can be quantified and appear to be substantial• Estimated size of rebound effects seems to increase with the scope and boundary of the analysis• Contribution of efficiency improvements to carbon mitigation continues to be overestimated • Uncomfortable implications for policy – can energy/carbon pricing mitigate this effect?
  • 46. Suggested policy responses• Allow for rebound in policy appraisals• Introduce progressive efficiency standards• Impose increasingly stringent carbon taxes or emission caps• Seek comprehensive, global climate agreement to prevent all forms of carbon leakage... 46

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