IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v36y2015i1p1-22.html

A Microeconomic Framework for Evaluating Energy Efficiency Rebound and Some Implications

Author

Listed:
  • Severin Borenstein

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.

Suggested Citation

  • Severin Borenstein, 2015. "A Microeconomic Framework for Evaluating Energy Efficiency Rebound and Some Implications," The Energy Journal, , vol. 36(1), pages 1-22, January.
    • Handle: RePEc:sae:enejou:v:36:y:2015:i:1:p:1-22
    DOI: 10.5547/01956574.36.1.1
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.36.1.1
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.36.1.1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Massié, Camille & Belaïd, Fateh, 2024. "Estimating the direct rebound effect for residential electricity use in seventeen European countries: Short and long-run perspectives," Energy Economics, Elsevier, vol. 134(C).
    2. Huntington, Hillard G., 2024. "US gasoline response to vehicle fuel efficiency: A contribution to the direct rebound effect," Energy Economics, Elsevier, vol. 136(C).
    3. Matthew E. Oliver & Juan Moreno-Cruz & Kenneth T. Gillingham, 2025. "Microeconomics of the Solar Rebound Under Net Metering," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 12(5), pages 1317-1353.
    4. Sonds Kahouli & Xavier Pautrel, 2023. "Residential and Industrial Energy Efficiency Improvements: A Dynamic General Equilibrium Analysis of the Rebound Effect," The Energy Journal, , vol. 44(3), pages 23-63, May.
    5. Feyzollahi, Maryam & Rafizadeh, Nima, 2025. "The price-emissions nexus in U.S. residential electricity markets," Resource and Energy Economics, Elsevier, vol. 83(C).
    6. von Ditfurth, Jakob & Rausch, Sebastian, 2025. "How cost-effective were subsidies for solar energy in Germany?," ZEW Discussion Papers 25-018, ZEW - Leibniz Centre for European Economic Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sheldon, Tamara L. & Dua, Rubal, 2018. "Gasoline savings from clean vehicle adoption," Energy Policy, Elsevier, vol. 120(C), pages 418-424.
    2. de Chalendar, Jacques A. & Benson, Sally M., 2021. "A physics-informed data reconciliation framework for real-time electricity and emissions tracking," Applied Energy, Elsevier, vol. 304(C).
    3. Andor, Mark A. & Gerster, Andreas & Peters, Jörg & Schmidt, Christoph M., 2020. "Social Norms and Energy Conservation Beyond the US," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    4. Erik P. Johnson & Juan Moreno-Cruz, 2020. "Congestion in the Electricity Transmission System Redistributes Pollution across Long Distances," CESifo Working Paper Series 8483, CESifo.
    5. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    6. Lang, Corey & Okwelum, Edson, 2015. "The mitigating effect of strategic behavior on the net benefits of a direct load control program," Energy Economics, Elsevier, vol. 49(C), pages 141-148.
    7. Soomin Woo & Zhe Fu & Elpiniki Apostolaki-Iosifidou & Timothy E. Lipman, 2021. "Economic and Environmental Benefits for Electricity Grids from Spatiotemporal Optimization of Electric Vehicle Charging," Energies, MDPI, vol. 14(24), pages 1-22, December.
    8. Will, Christian & Zimmermann, Florian & Ensslen, Axel & Fraunholz, Christoph & Jochem, Patrick & Keles, Dogan, 2024. "Can electric vehicle charging be carbon neutral? Uniting smart charging and renewables," Applied Energy, Elsevier, vol. 371(C).
    9. Erbaş, Mehmet & Kabak, Mehmet & Özceylan, Eren & Çetinkaya, Cihan, 2018. "Optimal siting of electric vehicle charging stations: A GIS-based fuzzy Multi-Criteria Decision Analysis," Energy, Elsevier, vol. 163(C), pages 1017-1031.
    10. Olkkonen, Ville & Hirvonen, Janne & Heljo, Juhani & Syri, Sanna, 2021. "Effectiveness of building stock sustainability measures in a low-carbon energy system: A scenario analysis for Finland until 2050," Energy, Elsevier, vol. 235(C).
    11. Bi, Zicheng & Kan, Tianze & Mi, Chunting Chris & Zhang, Yiming & Zhao, Zhengming & Keoleian, Gregory A., 2016. "A review of wireless power transfer for electric vehicles: Prospects to enhance sustainable mobility," Applied Energy, Elsevier, vol. 179(C), pages 413-425.
    12. Kim, Hyunjung & Kim, Dae-Wook & Kim, Man-Keun, 2022. "Economics of charging infrastructure for electric vehicles in Korea," Energy Policy, Elsevier, vol. 164(C).
    13. Abrell, Jan & Kosch, Mirjam & Rausch, Sebastian, 2019. "Carbon abatement with renewables: Evaluating wind and solar subsidies in Germany and Spain," Journal of Public Economics, Elsevier, vol. 169(C), pages 172-202.
    14. Stephen P. Holland & Erin T. Mansur & Nicholas Z. Muller & Andrew J. Yates, 2016. "Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors," American Economic Review, American Economic Association, vol. 106(12), pages 3700-3729, December.
    15. Steven M. Smith, 2019. "The Relative Economic Merits of Alternative Water Rights," Working Papers 2019-08, Colorado School of Mines, Division of Economics and Business.
    16. Stephen P. Holland & Erin T. Mansur & Nicholas Z. Muller & Andrew J. Yates, 2019. "Distributional Effects of Air Pollution from Electric Vehicle Adoption," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 65-94.
    17. Tamara L. Sheldon & Rubal Dua & Omar Abdullah Alharbib, 2023. "How Cost-effective are Electric Vehicle Subsidies in Reducing Tailpipe-CO2 Emissions? An Analysis of Major Electric Vehicle Markets," The Energy Journal, , vol. 44(3), pages 223-250, May.
    18. Linn, Joshua & Muehlenbachs, Lucija, 2018. "The heterogeneous impacts of low natural gas prices on consumers and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 1-28.
    19. Holladay, J. Scott & Price, Michael K. & Wanamaker, Marianne, 2015. "The perverse impact of calling for energy conservation," Journal of Economic Behavior & Organization, Elsevier, vol. 110(C), pages 1-18.
    20. Maxwell Woody & Michael T. Craig & Parth T. Vaishnav & Geoffrey M. Lewis & Gregory A. Keoleian, 2022. "Optimizing future cost and emissions of electric delivery vehicles," Journal of Industrial Ecology, Yale University, vol. 26(3), pages 1108-1122, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:36:y:2015:i:1:p:1-22. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.