Work

A Microeconomic Framework for Evaluating Energy Efficiency Rebound And Some Implications

Year: 2013

Type: article

Abstract: Improving energy efficiency can lower the cost of using energy-intensive goods and may create wealth from the energy savings, both of which lead to increased energy use, a “rebound” effect. I present a theoretical framework that parses rebound into economic income and substitution effects. The framework leads to new insights about the magnitude of rebound when goods are not priced at marginal cost and when consumers are imperfect optimizers, as well as the role of technological progress in rebound. I then explore the implications of this framework with illustrative calculations for improved auto fuel economy and lighting efficiency. These suggest that rebound is unlikely to more than offset the savings from energy efficiency investments (known as “backfire”), but rebound likely reduces the net savings by roughly 10% to 40% from these energy efficiency improvements.

Source: The Energy Journal

DOI: 10.3386/w19044

Author: Severin Borenstein

Institutions: National Bureau of Economic Research, University of California, Berkeley

Language: English

Topic: Energy, Environment, and Transportation Policies

Subfield: Renewable Energy, Sustainability and the Environment

Field: Energy

Domain: Physical Sciences

SDG: Affordable and clean energy

Open Access status: green

Funder: California Energy Commission