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July 12, 2012

IER STUDY: ENERGY EFFICIENCY MANDATES HAVE 'REBOUND EFFECT'

July 12, 2012
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WASHINGTON D.C. — The Institute for Energy Research released today a new study by IER Senior Fellow and Professor of Economics at Cal State University, Robert Michaels, detailing the ‘rebound effect’ of energy efficiency regulations. The report summarizes recent findings on ‘rebounds’ — the idea that the more efficient an appliance is, the more people will use it and thus negate the efficiency gains — and explores the global consequences of greater energy usage, particularly in the developing world.

“This study demonstrates anew the folly of directing energy policy through regulation, which often has unintended consequences that negate the efficiency goals and result in more energy consumption, not less,” IER President Thomas Pyle said of Michaels’ research.

“Instead of forcing more energy efficiency requirements on American consumers, policy makers and government regulators should allow market prices and disruptive innovations to guide energy use. A serious re-thinking of America’s energy policy is in order, and we can no longer assume that more regulation of energy will reduce consumption. A sensible energy policy is needed — one that considers efficiency mandates in light of ‘rebounds’ and gives Americans the choices of affordable energy they want.”

Among the study’s key highlights:

  • Rebounds have a direct implication for energy efficiency mandates and incentives. If rebounds are substantial, efficiency policies will be less effective at reducing air pollutants, for example, as any energy “saved” can easily find other uses, and energy consumption may even increase in the event of backfires. This paper explores the literature on energy efficiency rebounds and provides a framework for how to think about energy efficiency policy.
  • There are four basic types of rebound that might result from improved energy efficiency, defined by the markets in which their effects occur: direct rebound, indirect rebound, economy-wide rebound, and embedded energy.
  • Direct rebounds are well documented: more than 200 studies exist on the subject.
  • For example, studies on direct rebound have found that household behaviors before and after installation of energy-efficient appliances produce wide ranges of rebounds, for example between 10 and 60 percent for electric heating in the short run. In particular, studies have found that wealthy households that already own all major appliances do not reduce energy consumption after buying more efficient ones.
  • A high percentage of utility-sponsored conservation and efficiency programs have found that actual savings fall short of projected ones, a possible manifestation of rebounds.
  • For economy-wide estimates of rebound using “computable general equilibrium” models, over half the available studies show that rebounds approach or exceed 100 percent. In other words, their net result is that more energy was consumed than saved.

To read the full report, click here.

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8 Responses to “IER STUDY: ENERGY EFFICIENCY MANDATES HAVE 'REBOUND EFFECT'”

  1. Michael Pettengill on

    The logic is flawed in that it assumed the only point of energy efficiency is reducing energy use.  Higher energy efficiency first provides an improved lifestyle – improving the energy efficiency of a poor family getting subsidized heating oil will allow them to be warm when subsidized heating oil is available, which can allow children to study at home, while mitigating the impact of lost energy heating subsidies.

    For the middle class and wealthy, energy efficiency allows for more luxury on the same or reduced energy.

    In any economic activity where efficiency improves, say the use of technology capital assets to reduce labor, the response is a rebound – the labor remains constant while production increases and the investor and worker gets increased returns while the lower price benefits consumers who increase the quantity consumed.

    The opportunity for increased energy efficiency is as great as the opportunity for increased productivity, and both are opposites of the same coin.

    And the solar power available to be harnessed is so huge, investment in wind and solar energy capital can proceed for a century to allow many times the per person energy use in a century or five without destruction of the enviornment.  If only self described capitalist actually embraced capitalism instead of calling the pillage and plunder of capital by burning it “capitalism”.

    Reply
    • J Tyler Hall on

      I think you need to do a little more research into the effectiveness and efficiency of solar and wind energy. Instead of pretending its the silver bullet that will save the world.

      People who claim to be capitalists are foolish. Capitalism was a term first coined by Marx, used in a derogatory manner to label the west. What we have in america atm is a combination of socialism and crony corporatism.

      In your example subsidies for heating oil , do not in fact increase efficiency, they simple ensure the corporate entity providing the oil get the price they want, while those purchasing get the reduced rate. This is just wealth redistribution. Tax funds are redistributed to corporations. This creates a natural “I’ve got your back” relationship between the corporate world and the government world, which is very bad, because the corporate and government worlds have a lot more wealth/power/influence then the individual.

      America success was not built upon “capitalism” or government intervention. Our success was built upon the free market principles of Adam Smith and the idea of private property and personal liberty and responsibility. They were built by valuing the individual and his freedom and liberty above the collective.

      Furthermore, I don’t believe the author of this article is suggesting that the ONLY reason for energy efficiency laws is to reduce energy use, he is simple REBUTTING the incorrect assesments that energy efficiency laws WILL reduce energy use. Which is the argument made by proponents of said laws.

      Essential the article takes the free market position surrounding energy policy. Based on your response however, you seem to rather favor the lottery approach to success in life. Rather then rewarding hard work, innovation and determination, you’d prefer to just let the government choose who wins and hope that you are in that winning group, except, unless you are part of the corporate inner circle you you don’t have the wealth or influence to stack the deck in your favor… so sorry.

      Do you think the ex-CEO of Solyndra is living on the street?

      Reply
  2. Mikie21 on

    Using renewable energy is upping the cost to the consumer.  We are paying  30% more for electric than before!!

    That is the rebound effect I see at the consumer level.  Its stupid

    Reply

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