Saturday, 6 November 2010

Perhaps we should try what works

By Blake Alcott, School of Earth and Environment, University of Leeds

The jury is still out on the size of ‘economy-wide’, ‘macro’ or ‘total’ rebound. UKERC and 4CMR for instance hover in the range of 40-52%, albeit with caveats concerning trade effects, bunker fuels and other grave difficulties of definition and methodology. Some still say rebound is insignificant, but they usually mean only ‘direct’ rebound (car-driving, lighting, white goods) and underestimate indirect effects. Still others hold that from the environmental point of view efficiency ‘backfires’, i.e. total rebound is greater than 100%: Even more energy gets used up than in a less efficient economy – dubbed a ‘paradox’ by Jevons in 1865.

Others including myself ignore this paradox and assert that rebound is about 100%, meaning: Whatever energy resources lie fallow after we achieve efficiency increases get immediately consumed for expanding previous or related activities, by the same or marginal consumers.[1] This safely assumes a lot of latent demand given world poverty, population growth and conspicuous consumption. It also assumes a supply function showing profits in the primary energy sector. The first line of evidence for this view is the broad historical picture showing efficiency and consumption rising in lock-step. It seems only isolated individuals take efficiency dividends as more leisure, i.e., as less production in the first place.

A second line of evidence is an analogy: More efficient consumption of labour inputs, starting with the industrial revolution, unleashed a pan-European debate whether this means labour saving, i.e. mass unemployment. In fact labour-efficiency ‘backfired’ hugely, and nobody any longer claims more than some resulting temporary unemployment. Thirdly, many direct rebounds do seem to be greater than 100% – perhaps lighting, pig iron or fertiliser production, or air travel.

In my opinion all this places an initial burden of proof on the position that rebound is significantly lower than 100%. Instead of asking ‘Where’s the rebound?’ we can ask ‘Where are the savings?’

All rebound positions rely heavily on theory.
Consumption increase is not denied, for instance, but it is claimed that without efficiency increases (whether policy-induced or as business-as-usual cost-cutting), it would have increased even more. A bizarre corollary of this, however, is that we would be consuming vastly more energy than we are now had engine efficiency been frozen at the level of Watt’s time.

However, rebound theory and methodology are poorly developed.[2] What, for instance, do direct rebounds, measured to the nearest nano-joule, tell us? Averaging them over the whole world economy doesn’t help us follow indirect effects. There is even confusion over the difference between direct and total rebound, causing online polemical storms as in the case of the Economist’s recent report on lighting. What, moreover, is the value of country or OECD studies without reliable ways to adjust for trade, bunker fuels, developing-world demand curves, etc.?

Further, if we work with prices, income effects and elasticities of demand we must formally recognise that consumer gains in purchasing power mean equal losses in purchasing power for energy sellers – a methodological dead-end. If moreover our model treats GDP and population exogenously, we are begging the all-important question of efficiency’s influence on these two variables. Or, if we work with production functions we must acknowledge the relative rise in demand for a factor that has become more productive (efficient), and that all efficiencies together expand the production possibilities frontier.

These 30-year-old insights have fallen on deaf ears: Short of complete satiation some rebound, to be sure, is uncontested, but theory is too weak to get governments and their intellectual contractors to enter even a modest rebound co-efficient when judging the effectiveness of efficiency policies. An employee of the Swiss Energy Office told me with a straight face that until rebound can be exactly measured it is zero!

How then do we judge efficiency policies – or even state-paid research on efficiency and barriers thereto – in light of this uncertainty? First, is greater efficiency a necessary condition for reduction of depletion and pollution rates? Obviously not: Caps and high environmental taxes reach the goal by definition – efficiency would follow privately, as a matter of course, and be seen for what it is, namely squeezing maximum affluence out of any given amount of a natural resource.

Is greater efficiency a sufficient condition for lower impact? As asserted above, a combination of empirical data and theoretical considerations indicates this is highly unlikely. A multi-disciplinary view from history, psychology, anthropology and economics loudly hint that fallow resources get snapped up

For environmental policy, it seems to me, efficiency is barking up the wrong tree.

[1] google Polimeni et al., 2008, Jevons Paradox, Earthscan; Herring & Sorrell, 2009, Energy Efficiency, Palgrave Macmillan; Energy Policy journal, Len Brookes.
[2] Madlener, Reinhard, and Blake Alcott, 2009. Energy rebound and economic growth: A review of the main issues and research needs. Energy 34: 370-376.


  1. This is a challenging article - I agree with much of your argument, one comment:
    Which conditions are necessary for preventing energy saving from affording "fallow" resources? For example, energy saving coupled with energy shortages or a high level of carbon taxation might be painful ways of avoiding some rebound effects, but are there practical strategies to address rebound temptations?

  2. I believe that one could define some kind of baseline, or minimum service level, above which energy use is discretionary. (However, it is true that this baseline keeps increasing every decade.)

    For us in the West on a personal level it includes shelter with heating, food with refrigeration, hot and cold water, communication (phone, internet, computer), transport, entertainment, access to goods.

    If these basic services can be provided more efficiently then that will drop the baseline energy use. Theoretically, behaviour change can be used to prevent all of the saved energy being used on the rebound for other purposes.

    I wanted to make the point that I don't think energy efficiency is necessarily a waste of time.

    Rachel Freeman

  3. Blake Alcott replied:
    "Dear Paul and Rachel, thanks for your interest. My simple, if not simple-minded, reply is to return to the starting-point of energy-efficiency policy: We are looking for ways to lower fossil fuel consumption, so... let's lower fossil fuel consumption. This can be done by caps.
    But there is an emotional issue here: Is there a painless, indirect way of lowering fossil fuel consumption without giving up (very much) affluence? I.e. we want painlessness. But I am suggesting beginning at the other end, not with our affluence concerns and desire for no pain (no cost), but with the environmental problem: First the caps - the environmental work is done. Then each individual chooses some combination of efficiency, sufficiency, renewables and fewer offspring to squeeze as much comfort and 'things' out of their energy budget.
    Granted, the exact height of rebound is not known. But enough research has been done to know that it is nothing to scoff at, and most importantly, what do we do in the face of uncertainty? Do we say, Yes, unfortunately efficiency rebounds could wipe out (very much of) the savings, but let's try and hope? Or do we say, Let's go for what is guaranteed to work? We will then see what standard of living, for how many people, is possible. Might be bad news: caps would be very honest! As it is, efficiency and nice programmes like 10:10, and 'sufficiency for your own good' let us believe we can have our cake and eat it, too. It means continuing to put the specifically environmental issues in the back seat: They can wait, let's first see if efficiency can win the race with consumption. (The only facts we have show both efficiency and consumption rising. That is the beginning of any empirical discussion, I think.)
    It must seem strange in discussing rebound to argue that we quit discussing rebound, but I would rather see our precious time and research money spent on designing and politically marketing a good caps system than on measuring even the indirect rebounds following a nation-wide installation of triple-glazing.
    The New Yorker by the way in the Dec 20/27 double issue, has a great article written by David Owen on this issue, for which Yours Truly got to put in his two cents' worth."

    Thanks Blake.

  4. Blake/Paul,

    Too right.

    This argument applies to carbon taxes as well as to energy efficiency measures. Pure carbon taxes could simply redistribute carbon emissions amongst the population as discussed here.