The Rebound Effect

Someone recently suggested to me that by conserving energy and boosting efficiency, we are likely to lower prices to the point that we will end up using more energy resources than we do now. This is actually an extreme condition of a well-known phenomena called the "rebound effect". The concept is that if we increase efficiency by 50%, we will not see a 50% reduction in fuel consumption because people will tend to use more (rebound). Jevons Paradox goes further to say that final consumption could actually be higher than initial consumption in some cases.

Here is a table of typical rebound effects for different markets.


The theory that boosting energy efficiency will inevitably end up increasing energy demand is, in my opinion, unrealistic. One reason is that energy markets are much more complicated than simple supply/demand. Some energy markets seem largely unaffected by cost -- people continue to use what they want regardless of the cost. For example, if our cars could get twice as many miles per gallon, would we really drive twice as much as we do now? There aren't enough hours in a day. Conversely, when gas prices doubled recently, did people use half as much fuel? Of course not, we kept buying more and more and just lived without other less necessary things (food, clothing, etc.).




The graphs above show the effect that gasoline prices have on fuel consumption. Doesn't seem to really make any difference what it costs -- we just keep buying more. Cost is normalized to 2006 dollars and all data comes from EIA. I'll post some electricity graphs in a bit, but they show the same story.