As the energy efficiency of products, homes, and businesses improves, it becomes less expensive to operate them. The rebound effect is a postulate that people increase their use of products and facilities as a result of this reduction in operating costs, thereby reducing the energy savings achieved. Periodically over the years, some analysts raise questions about the rebound effect, arguing that it is a major factor that needs to be accounted for when analyzing energy efficiency programs. This paper is written in “question and answer” format and is designed to summarize what we know, what we do not, and—given what we know—how large the rebound effect is likely to be.
We find that there are both direct and indirect rebound effects, but these tend to be modest. Direct rebound effects are generally 10% or less. Indirect rebound effects are less well understood but the best available estimate is somewhere around 11%. These two types of rebound can be combined to estimate total rebound at about 20%. We examined claims of “backfire” (100% rebound) and they do not stand up to scrutiny.
Overall, even if total rebound is about 20%, then 80% of the savings from energy efficiency programs and policies register in terms of reduced energy use. And the 20% rebound contributes to increased consumer amenities (for example, more comfortable homes) as well as to a larger economy. These savings are not “lost” but put to other generally beneficial uses.