Energy efficiency improvements often lead to economic expansion, which in turn leads to increased energy use. As a result, energy efficiency policies are often met with scepticism as they do not deliver the full extent of the energy/environmental benefits that would be possible from an engineering standpoint. Recent work from the International Energy Agency has argued that energy efficiency can deliver a range of socio-economic benefits, wider than simply reductions in energy use and environmental impacts. This chapter argues that it is possible to achieve economic expansion and reductions in energy use simultaneously, essentially decoupling economic impacts of energy efficiency from the energy/environmental impacts. Our modelling work on a small-scale energy efficiency programme in Scotland provides empirical evidence that support this view, clearly demonstrating that it is possible to achieve economic expansion while reducing total energy use. However, the results are not guaranteed in every case. The characteristics of each energy efficiency improvement programme, e.g. timeframe and target (production or consumption side of the economy), have a key role to play in determining the outcomes of each programme. Therefore, a case-by-case analysis is necessary to estimate the potential impacts of an energy efficiency improvement programme.
Kim Swales and Karen Turner
The basic input-output model is first extended by differentiating industry outputs by region. The consequent interregional input-output matrix accounts for pollution footprints of final consumption, possibly even including household income effects, which further boost output and pollution. Another extension is the internalization of cleansing activities, to account for the social cost of emissions. Attempts at full integration of production and environmental accounting, following the "materials balance principle," are critically examined. Other environmental analyses follow. Water satellite accounts facilitate the analysis of water trade. Waste input-output models integrate waste creation and management options so that waste can be tracked. Energy efficiency improvements reduce costs, which in turn boosts demand for energy: the rebound effect. The rebound effect is related to the input-output multipliers that include the household consumption effects. The extension to general equilibrium analysis is introduced.