The rebound effect: Microeconomic definitions, limitations and extensions

By S. Sorrell, John Dimitropoulos. 2008

914 citations recorded by the source corpus.

Abstract The rebound effect results in part from an increased consumption of energy services following an improvement in the technical efficiency of delivering those services. This increased consumption offsets the energy savings that may otherwise be achieved. If the rebound effect is sufficiently large it may undermine the rationale for policy measures to encourage energy efficiency. The nature and magnitude of the rebound effect is the focus of long-running dispute with energy economics. This paper brings together previous theoretical work to provide a rigorous definition of the rebound effect, to clarify key conceptual issues and to highlight the potential consequences of various assumptions for empirical estimates of the effect. The focus is on the direct rebound effect for a single energy service — indirect and economy-wide rebound effects are not discussed. Beginning with Khazzoom's original definition of the rebound effect, we expose the limitations of three simplifying assumptions on which this definition is based. First, we argue that capital costs form an important part of the total cost of providing energy services and that empirical studies that estimate rebound effects from variations in energy prices are prone to bias. Second, we argue that energy efficiency should be treated as an endogenous variable and that empirical estimates of the rebound effect may need to apply a simultaneous equation model to capture the joint determination of key variables. Third, we explore the implications of the opportunity costs of time in the production of energy services and highlight the consequences for energy use of improved ‘time efficiency’, the influence of time costs on the rebound effect and the existence of a parallel rebound effect with respect to time. Each of these considerations serves to highlight the difficulties in obtaining reliable estimates of the rebound effect and the different factors that need to be controlled for. We discuss the implications of these findings for econometric studies and argue that several existing studies may overestimate the magnitude of the effect.

Subfields: Economics and Econometrics, Pollution, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/23669e40a27ea7e692bbab4bec4fdf0071e69bcf

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Citations in the corpus

The economy-wide rebound effect from improved energy efficiency in Swedish industries–A general equilibrium analysis (2015, background): “There exist a number of papers that explicitly discuss the rebound effect in general and overviews the existing literature (Greening et al., 2000; Berkhout et al., 2000; Binswanger, 2001; Sorrell, 2007; Sorrell and Dimitropoulos, 2008; Sorrell et al., 2009; Herring and Sorrell, 2009; Madlener and Al”
ENERGY REBOUND AND ECONOMIC GROWTH: A REVIEW OF THE MAIN ISSUES AND RESEARCH NEEDS (2009, background): “For further rigorous statements and definitions of rebound see, e.g., Wirl [10, p. 31], Birol and Keppler [11, pp. 460–463], Schipper and Grubb [12, pp. 369–370], Binswanger [13, p. 120], Sorrel and Dimitropoulos [14], and the synopsis provided in Herring [15] and Herring and Roy [16].”
The Rebound Effect and Energy Efficiency Policy (2016, background): “Other studies are even broader and include any additional energy use not captured by the direct rebound (including macroeconomic effects) as part of the indirect rebound (Sorrell et al. 2008).”
Energy, Economic Growth and Environmental Sustainability: Five Propositions (2010, background): “Khazzoom [3] and has since been the focus of much research [4-6].”
Estimating direct and indirect rebound effects for U.S. households with input–output analysis Part 1: Theoretical framework (2013, background): “Theeconomicsliteraturetendstoignorethedistinctionbetweenen-ergy and energy services, which recent work has emphasized (Sorrell and Dimitropoulos, 2008), and exclude embodied energy or emissions, while the industrial ecology literature largely ignores the distinction be-tween average and marginal…”
What if consumers decided to all 'go green'? Environmental rebound effects from consumption decisions (2013, neutral): “This contrasts the position of Sorrell and Dimitropoulos (2008) who propose that the embodied resource requirements of replacement capital comprise part of the rebound eﬀect.”
Missing carbon reductions? Exploring rebound and backfire effects in UK households (2010, background): “Knowledge Collaboration & Learning for Sustainable Innovation ERSCP-EMSU conference, Delft, The Netherlands, October 25-29, 20103 3 was first studied by Khazzoom (1980) and has since been the focus of much research (Greening et al. 2000; Sorrell and Dimitropoulos 2007a; Sorrell and Dimitropoulos 200”