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International Handbook on the Economics of Energy

Edited by Joanne Evans and Lester C. Hunt

As an essential component for economic growth, energy has a significant impact on the global economy. The need to meet growing energy demand has prompted cutting-edge innovation in clean technology in an attempt to realise environmental and cost objectives, whilst ensuring the security of energy supply. This Handbook offers a comprehensive review of the economics of energy, including contributions from a distinguished array of international specialists. It provides a thorough discussion of the major research issues in this topical field of economics.
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Chapter 9: The Rebound Effect: Definition and Estimation

Steve Sorrell


Steve Sorrell* 1 Introduction To achieve reductions in carbon emissions, most governments are seeking ways to improve energy efficiency throughout the economy. It is generally assumed that such improvements will reduce overall energy consumption, at least compared to a scenario in which such improvements are not made. But a range of mechanisms, commonly grouped under the heading of ‘rebound effects’ may reduce the size of the ‘energy savings’ achieved. Indeed, there is some evidence to suggest that the introduction of certain types of energy-efficient technology in the past has contributed to an overall increase in energy demand – an outcome that has been termed ‘backfire’. This applies in particular to pervasive new technologies, such as steam engines in the nineteenth century, that significantly raise overall economic productivity as well as improving energy efficiency (Alcott, 2005). These rebound effects could have far-reaching implications for energy and climate policy. While cost-effective improvements in energy efficiency should improve welfare and benefit the economy, they could in some cases provide an ineffective or even a counterproductive means of tackling climate change. However, it does not necessarily follow that all improvements in energy efficiency will increase overall energy consumption or in particular that the improvements induced by policy measures will do so. The nature, operation and importance of rebound effects are the focus of a longrunning debate within energy economics. On the micro level, the question is whether improvements in the technical efficiency of energy use can be expected to reduce energy consumption by the amount...

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