The rebound effect: Microeconomic definitions, limitations and extensions
The rebound effect results in part from an increased consumption of energy services following an improvement in the technical efficiency of delivering those services. This increased consumption offsets the energy savings that may otherwise be achieved. If the rebound effect is sufficiently large it may undermine the rationale for policy measures to encourage energy efficiency. The nature and magnitude of the rebound effect is the focus of long-running dispute with energy economics. This paper brings together previous theoretical work to provide a rigorous definition of the rebound effect, to clarify key conceptual issues and to highlight the potential consequences of various assumptions for empirical estimates of the effect. The focus is on the direct rebound effect for a single energy service -- indirect and economy-wide rebound effects are not discussed. Beginning with Khazzoom's original definition of the rebound effect, we expose the limitations of three simplifying assumptions on which this definition is based. First, we argue that capital costs form an important part of the total cost of providing energy services and that empirical studies that estimate rebound effects from variations in energy prices are prone to bias. Second, we argue that energy efficiency should be treated as an endogenous variable and that empirical estimates of the rebound effect may need to apply a simultaneous equation model to capture the joint determination of key variables. Third, we explore the implications of the opportunity costs of time in the production of energy services and highlight the consequences for energy use of improved 'time efficiency', the influence of time costs on the rebound effect and the existence of a parallel rebound effect with respect to time. Each of these considerations serves to highlight the difficulties in obtaining reliable estimates of the rebound effect and the different factors that need to be controlled for. We discuss the implications of these findings for econometric studies and argue that several existing studies may overestimate the magnitude of the effect.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Klein, Yehuda Levi, 1987. "Residential energy conservation choices of poor households during a period of rising fuel prices," Resources and Energy, Elsevier, vol. 9(4), pages 363-378, December.
- A. Greening, Lorna & Greene, David L. & Difiglio, Carmen, 2000. "Energy efficiency and consumption -- the rebound effect -- a survey," Energy Policy, Elsevier, vol. 28(6-7), pages 389-401, June.
- Joyce Dargay & Dermot Gately, 1994. "Oil Demand in the Industrialized Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 39-67.
- David L. Greene, 1992. "Vehicle Use and Fuel Economy: How Big is the "Rebound" Effect?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 117-144.
- Grepperud, Sverre & Rasmussen, Ingeborg, 2004. "A general equilibrium assessment of rebound effects," Energy Economics, Elsevier, vol. 26(2), pages 261-282, March.
- Zein-Elabdin, Eiman O., 1997. "Improved stoves in Sub-Saharan Africa: the case of the Sudan," Energy Economics, Elsevier, vol. 19(4), pages 465-475, October.
- Dermot Gately, 1993. "The Imperfect Price-Reversibility of World Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 163-182.
- Willett, Keith D. & Naghshpour, Shahdad, 1987. "Residential demand for energy commodities : A household production function approach," Energy Economics, Elsevier, vol. 9(4), pages 251-256, October.
- Berkhout, Peter H. G. & Muskens, Jos C. & W. Velthuijsen, Jan, 2000. "Defining the rebound effect," Energy Policy, Elsevier, vol. 28(6-7), pages 425-432, June.
- Brookes, Len, 1990. "The greenhouse effect: the fallacies in the energy efficiency solution," Energy Policy, Elsevier, vol. 18(2), pages 199-201, March.
- Michael Parti & Cynthia Parti, 1980. "The Total and Appliance-Specific Conditional Demand for Electricity in the Household Sector," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 309-321, Spring.
- David L. Greene & James R. Kahn & Robert C. Gibson, 1999. "Fuel Economy Rebound Effect for U.S. Household Vehicles," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-31.
- Milne, Geoffrey & Boardman, Brenda, 2000. "Making cold homes warmer: the effect of energy efficiency improvements in low-income homes A report to the Energy Action Grants Agency Charitable Trust," Energy Policy, Elsevier, vol. 28(6-7), pages 411-424, June.
- Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
- Kok, Rixt & Benders, Rene M.J. & Moll, Henri C., 2006. "Measuring the environmental load of household consumption using some methods based on input-output energy analysis: A comparison of methods and a discussion of results," Energy Policy, Elsevier, vol. 34(17), pages 2744-2761, November.
- Schipper, Lee & Grubb, Michael, 2000. "On the rebound? Feedback between energy intensities and energy uses in IEA countries," Energy Policy, Elsevier, vol. 28(6-7), pages 367-388, June.
- Binswanger, Mathias, 2001. "Technological progress and sustainable development: what about the rebound effect?," Ecological Economics, Elsevier, vol. 36(1), pages 119-132, January.
- Bentzen, Jan, 2004. "Estimating the rebound effect in US manufacturing energy consumption," Energy Economics, Elsevier, vol. 26(1), pages 123-134, January.
- Blair, Roger D & Kaserman, David L & Tepel, Richard C, 1984. "The Impact of Improved Mileage on Gasoline Consumption," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 209-17, April.
- Jalas, Mikko, 2002. "A time use perspective on the materials intensity of consumption," Ecological Economics, Elsevier, vol. 41(1), pages 109-123, April.
- Pollak, Robert A & Wachter, Michael L, 1975. "The Relevance of the Household Production Function and Its Implications for the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 255-77, April.
- J. Daniel Khazzoom, 1980. "Economic Implications of Mandated Efficiency in Standards for Household Appliances," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 21-40.
- Haas, Reinhard & Schipper, Lee, 1998. "Residential energy demand in OECD-countries and the role of irreversible efficiency improvements," Energy Economics, Elsevier, vol. 20(4), pages 421-442, September.
- Roy, Joyashree, 2000. "The rebound effect: some empirical evidence from India," Energy Policy, Elsevier, vol. 28(6-7), pages 433-438, June.
- Patterson, Murray G, 1996. "What is energy efficiency? : Concepts, indicators and methodological issues," Energy Policy, Elsevier, vol. 24(5), pages 377-390, May.
- Peter M. Schwarz & Thomas N. Taylor, 1995. "Cold Hands, Warm Hearth? Climate, Net Takeback, and Household Comfort," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 41-54.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:65:y:2008:i:3:p:636-649. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.