"The Rebound Effect", Do improvements in energy efficiency lead to economy-wide reduction in energy consumption?

Martin Stastny

Bachelor's thesis

Abstract:

Improving energy efficiency is considered to be one of the means to successfully reduce energy consumption. At the same time improving energy efficiency implies that the real price for energy services will decrease and as a result will stimulate energy consumption whereas savings associated with higher energy efficiency will be partially diminished. This paradox is better known as the rebound effect. Additionally to a detailed definition of the direct rebound effect,this thesis establishes on the basis of existing researches that the price elasticity of demand for energy services plays a major role in terms of the extent of the rebound effect. Based on the triggers for the rebound effect, applicable policies are proposed and analyzed which can soften rebound effects - such as carbon tax, cap and trade system and standards and regulations. In this context most policies aim to increase the real price of energy services. This thesis concludes both that the existing energy efficiency policies are not adequately pursued and that energy efficiency technology should be fostered since it will also weaken rebound effects.

Abstract:

Improving energy efficiency is considered to be one of the means to successfully reduce energy consumption. At the same time improving energy efficiency implies that the real price for energy services will decrease and as a result will stimulate energy consumption whereas savings associated with higher energy efficiency will be partially diminished. This paradox is better known as the rebound effect. Additionally to a detailed definition of the direct rebound effect,this thesis establishes on the basis of existing researches that the price elasticity of demand for energy services plays a major role in terms of the extent of the rebound effect. Based on the triggers for the rebound effect, applicable policies are proposed and analyzed which can soften rebound effects - such as carbon tax, cap and trade system and standards and regulations. In this context most policies aim to increase the real price of energy services. This thesis concludes both that the existing energy efficiency policies are not adequately pursued and that energy efficiency technology should be fostered since it will also weaken rebound effects.

Abstract:

Improving energy efficiency is considered to be one of the means to successfully reduce energy consumption. At the same time improving energy efficiency implies that the real price for energy services will decrease and as a result will stimulate energy consumption whereas savings associated with higher energy efficiency will be partially diminished. This paradox is better known as the rebound effect. Additionally to a detailed definition of the direct rebound effect, this thesis establishes on the basis of existing researches that the price elasticity of demand for energy services plays a major role in terms of the extent of the rebound effect. Based on the triggers for the rebound effect, applicable policies are proposed and analyzed which can soften rebound effects - such as carbon tax, cap and trade system and standards and regulations. In this context most policies aim to increase the real price of energy services. This thesis concludes both that the existing energy efficiency policies are not adequately pursued and that energy efficiency technology should be fostered since it will also weaken rebound effects.

Keywords

Energy efficiency, Energy policy, Rebound effect

Keywords

Energy policy, Energy efficiency, Rebound effect

Keywords

Energieffizienz, Rebound Effekt, Energiepolitik

Language used: German

Date on which the thesis was submitted / produced: 29. 10. 2015

Thesis defence

• Date of defence: 13. 6. 2016
• Supervisor: Silvester van Koten
• Reader: Helena Chytilová

Vysoká škola ekonomická v Praze

Bachelor programme / field:
Ekonomie a hospodářská správa / Economics