Energy Efficiency, ‘Rebound,’ And The Rise Of The Rest

Two-thirds of total energy is consumed in the “productive” sectors of the economy — agriculture, industry, and commercial sectors — to refine and transmit energy and make and transport the goods we consume. And while more study of rebound effects for efficiency improvements at producing firms (e.g. industry and commerce) is needed, the literature to date indicates that direct rebound effects may be on the order of 20-70% for these sectors, with additional rebound due to indirect and macroeconomic effects.

In short, rebounds associated with the energy used hidden in the productive sectors of the economy can be much greater than rebound in the end-use consumer energy services we are most familiar with in our daily lives.

Furthermore, when it comes to global energy demand trends, the rich countries we call home are just a small part of the story. The International Energy Agency, for example,projects that virtually all of the growth in energy demand over the coming decades will come from outside of the OECD (or “developed”) nations, with China and India chief among the increasingly energy hungry emerging economies.

As rebound effect expert and Breakthrough Institute Senior Fellow Harry Saunders and I explain in the magazine of the UN Industrial Organization:

“In contrast to conditions in wealthy nations, demand for energy services is far from saturated throughout the developing world. After all, roughly one-third of the global population still lacks sufficient access to even basic modern energy services.In the world’s emerging economies, the cost and availability of energy services is often a key constraint on their enjoyment. Demand is thus far more elastic (responsive to changes in price), and rebound effects much larger than in the developed economies. That in turn means rebound effects are much larger.

Very few studies have carefully examined rebound dynamics in developing economies, but those that have find direct rebound effects alone to be on the order of 40-80% for end-use consumer energy services, such as lighting and cooking fuel – more than twice as large as the equivalent rebounds found in wealthier nations.

As a wide body of development literature recognizes, expanding access to modern energy services is also a principal driver of development outcomes. Whether such services are provided by burning more fuels, burning them more efficiently, or both (the most likely scenario), the outcome is the same: greater economic activity and expanding welfare, which in turn demands more energy.”

As we thus cautioned:

Energy analysts [and everyone else!] must therefore be very careful in generalizing experiences or intuitions about rebound effects in rich, developed nations to the larger bulk of the global population living in developing economies. The shadow of Jevons’ Paradox still looms large over much of the developing world.

In other words, beware of the fallacy of the “Prius Fallacy.” Rebound is a much bigger deal…

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Read the full essay by Dr. Saunders and I in Making It, the UNIDO magazine here.

Read an introductory FAQ to rebound effects here.

You can also read our comprehensive review of the expert literature and research into rebound effects here.

For those interested, here’s David Owen narrating the promo video for his book, The Conundrum, which offers his own rebound examples drawn from familiar personal experiences (lighting and air transport), starting about 30 seconds in:

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