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The Rebound Effect: Theory, Evidence and Implications for Energy Policy

Von Utfall Danielsson, Carl (2010)
Department of Economics
Abstract
Improving energy efficiency is a popular means of reducing consumption of energy. When energy efficiency is improved, the marginal cost of energy and energy services will fall, leading to an increase in demand. This is called the rebound effect. This paper explains how the rebound effect arises and what determines the size of it. By examining existing research, it finds that rebound effects are ultimately determined by the price elasticity of demand for energy services, but that the research which is most reliable shows that these effects are small. The paper subsequently discusses the implications the rebound has on energy policy, with a focus on Swedish energy policy. It concludes that policies trying to induce energy efficiency... (More)
Improving energy efficiency is a popular means of reducing consumption of energy. When energy efficiency is improved, the marginal cost of energy and energy services will fall, leading to an increase in demand. This is called the rebound effect. This paper explains how the rebound effect arises and what determines the size of it. By examining existing research, it finds that rebound effects are ultimately determined by the price elasticity of demand for energy services, but that the research which is most reliable shows that these effects are small. The paper subsequently discusses the implications the rebound has on energy policy, with a focus on Swedish energy policy. It concludes that policies trying to induce energy efficiency improvements by attempting the raise the price of energy will also mitigate the rebound effect, indicating that these policies are more appropriate if rebound effects are large. (Less)
Please use this url to cite or link to this publication:
@misc{1551040,
  abstract     = {Improving energy efficiency is a popular means of reducing consumption of energy. When energy efficiency is improved, the marginal cost of energy and energy services will fall, leading to an increase in demand. This is called the rebound effect. This paper explains how the rebound effect arises and what determines the size of it. By examining existing research, it finds that rebound effects are ultimately determined by the price elasticity of demand for energy services, but that the research which is most reliable shows that these effects are small. The paper subsequently discusses the implications the rebound has on energy policy, with a focus on Swedish energy policy. It concludes that policies trying to induce energy efficiency improvements by attempting the raise the price of energy will also mitigate the rebound effect, indicating that these policies are more appropriate if rebound effects are large.},
  author       = {Von Utfall Danielsson, Carl},
  keyword      = {Energy Efficiency,rebound effect,energy policy,energy economics,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Rebound Effect: Theory, Evidence and Implications for Energy Policy},
  year         = {2010},
}