On the rebound? Feedback between energy intensities and energy uses in IEA countries

The interaction or feedback between energy efficiencies or energy intensities and energy use has long been the topic of debate. Some have argued that energy efficiency improvements, by reducing energy intensities and therefore lowering the cost of energy services, would lead to 'rebound’ effects offsetting much or all of any initial savings in energy. In this paper we analyse historical data on energy use, efficiency and pricing in different sectors to try and identify 'rebounds'. For the period of our data (since about 1970) we show that key measures of activity (car use, manufacturing output and structure, house area, etc.) have changed little in response to changes in energy prices or efficiency, instead continuing their long-term evolution relative to GDP or other driving factors. While our analysis cannot disentangle more macro-level economic feedbacks in a detailed way, we show indirectly that such effects also appear to have been small over the 1970s and 1980s. Overall, our analysis of disaggregated sectoral and subsectoral energy-use and activity trends in a variety of IEA economies, suggests that any feedback effect is small compared to both the effects on energy use of changes in energy intensities and overall economic growth. We conclude that most of the improvements in energy efficiencies led to reductions in energy intensities observed in the 1970s and 1980s. Weighted by 1990 activity levels, intensities were roughly 15–20% lower in 1994/5 than in 1973, which in turn meant real savings of energy; energy demand in IEA countries is roughly this much below what it would have been for the same GDP had these savings not occurred. “Rebounds” may have taken back some of the overall savings, but most remain, even after the fall of oil prices in 1986. Any boost to GDP as a result of these savings could not have been sufficient to increase energy demand enough to significantly alter these conclusions. That the savings remained after the fall in oil prices supports the notion that net savings — restrained energy growth relative to GDP in some formulations — arise from technological progress, even if energy prices do not increase. How far this effect can reach, however, is a matter of considerable debate.