Tuesday, May 10, 2011

Are There Rebound Effects from Energy Efficiency? – An Analysis of Empirical Data, Internal Consistency, and Solutions

Of the rigorously-framed hypotheses claiming that large negative rebounds exist, we measure them against the data, which refute the hypotheses. Rebounds at the end-use level are small and decrease over time. Rebounds at the economy-wide level are trivially small, and might well be a net positive.

Every few years, a new report emerges that tries to resurrect an old hypothesis: that energy efficiency policy paradoxically increases the amount of energy we consume. This paper attempts to develop a rigorous and scientifically sound hypothesis for rebound theory. It shows that many of the hypotheses on which the recent papers promoting rebound effects are based are neither scientific nor testable. Further, the formulations of previous rebound hypotheses are biased toward only discovering negative second order effects of efficiency policies. We provide an unbiased formulation of rebound theory and call for balanced research into both positive and negative second order effects.

Of the rigorously-framed hypotheses claiming that large rebounds exist, we measure them against the data. The data refute the hypotheses. Rebounds at the end use level are small and are decreasing over time. Rebounds at the economy-wide level are trivially small, and very well might be a net positive effect.
We then assess the rebound theorists‘ solutions to climate change. We find some of the solutions inconsistent with rebound theory itself. We also find that regardless of the extent to which rebound theory may be true, once an emissions cap is instituted, efficiency policies only enhance that solution.

Last, we analyze the qualitative nature of rebounds and find that they are largely providing basic energy services to low income communities and those in developing countries. Rebound theorists have yet to explain how recommendations of less reliance on energy efficiency does not require maintenance of lower standards of living for many poor and developing populations around the world.
A. Micro Level Data Do Not Support Large Rebounds
The data show that rebounds are small, diminishing over time, and difficult to measure. ―[E]mpirical evidence suggests that the size of the rebound effect is very small to moderate.‖41 Further, ―most of the direct energy savings from technical improvements in energy efficiency in OECD countries remain even after the direct rebound effect is accounted for. These findings from a U.S. Department of Energy and International Energy Agency combined study provide the most comprehensive data and analysis on rebounds. The study found rebound effect of 0 percent for residential appliances, 0-2 percent for commercial lighting, and 5-12 percent for residential lighting.  Given that utility energy efficiency programs, research and development, and codes and standards have focused heavily in these sectors and end uses, these results carry great explanatory weight. Additionally, the data showed a rebound effect of 0-20 percent for industrial processes, 10-30 percent for residential space heating, <10 percent-40 percent for residential water heating, and 0-50 percent for residential space cooling.44 In transportation, EPA and DOT conducted a thorough and comprehensive survey of rebound estimates and found that in 2000-2004 the rebound effect in transportation was 6 percent, and ultimately proposed to use a 10 percent rebound estimate.  These data demonstrate that to the extent rebounds occur, they are small.

The empirical evidence reveals that in addition to being small, rebounds are diminishing with time. As efficiency increases, the rebound effect decreases because: (1) energy costs as a share of total costs decreases, decreasing sensitivity to energy prices; (2) incomes increase, decreasing

B. Macro Level
1. Survey of the Data Does Not Support Rebound Theory
The data at the macro level show that rebound is trivially small, at rebound theory‘s best, and some data suggest the second order effects could be positive, at rebound theory‘s worst. The dearth of data at the macroeconomic or economy-wide level is greater than micro-level data.  The most comprehensive survey of  the literature shows that the economy-wide rebound effect is about 0.5 percent. In other words, ―more than 99 percent of the direct energy savings from energy efficiency improvements remain after the economy-wide effects are taken into account.

2. State Comparison Data Does Not Support the Rebound Theory
Given the rebound Hypothesis C: ―energy efficiency gains from policy will increase energy consumption above where it would be assuming the difference between proposed efficiency versus constant efficiency,‖ we can test it on an economy-wide level. The results refute it.

California embarked on a broad set of policy reforms to encourage efficiency and promote renewable energy in 1974, and has continued since. The California Energy Commission has estimated the cumulative electricity savings produced by these policies, using conservative assumptions, at about 15 percent of load..... The reduction in electricity use compared to the rest of the US is not smaller than what the policies were estimated to produce, it is greater. It is approximately four times as great. In addition to being 400 percent of expected results, realized savings are not compared here to a base case of roughly constant efficiency but compared to a base case of other states, some of which are also pursuing efficiency policies and all of which save energy due to spillover effects of California policies on efficiency.

Similar, but about 50 percent smaller, results are documented for New York State.
by David B. Goldstein 1, Sierra Martinez 2, and Robin Roy 3
1. co-directs the Natural Resources Defense Council’s Energy Program. He was instrumental in developing energy efficiency standards for new buildings and appliances in the US, Russia, Kazakhstan, and China. He received a Ph.D. in Physics from the University of California at Berkeley, is a Fellow of the American Physical Society and the recipient of its Leo Szilard Award for Physics in the Public Interest. He received a MacArthur Fellowship in 2002.
2. Energy attorney at NRDC. He holds a J.D. from Stanford Law School and has guest lectured at UC Berkeley School of Law on energy regulation and the environment.
 3. Director of Building Energy and Clean Energy Strategy at NRDC. He was formerly Project Director & Fellow at Congress’s Office of Technology Assessment. Dr. Roy received a PhD in Civil Engineering from Stanford University.
Natural Resources Defense Council (NRDC) www.NRDC.gov

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