Direct and Indirect Rebound Effects for the U.S. Household with
Input-Output Analysis
Brinda A. Thomas, Ines Azevedo
Background
Many policymakers support energy efficiency
policies as a cost-effective method to reduce
energy dependence, criteria air pollutant
emissions, and greenhouse gas emissions
(GHG), while providing economical energy
services. However, an investment in energy
efficiency may not yield expected energy
savings due to the rebound effect.
The rebound effect occurs in three main
forms. The direct rebound occurs when
consumers increase their utilization of an
efficient appliance because of its lower cost
of energy service. The indirect rebound
occurs when consumers re-spend energycost savings from an efficient appliance on
other goods, which require embodied energy
for their production. The economy-wide
rebound effect occurs if widespread energy
efficiency investments lead to a lower market
price for energy, leading to structural
changes in the economy and inducing
greater energy consumption.
Broader Impacts
Energy efficiency leads to lower energy
consumption, even after accounting for
direct and indirect rebound effects. Our
results indicate that there will be a modest
18-27% rebound in primary energy,
depending on the fuel saved with
efficiency. Rebound effects in GHG
emissions, shown below, are also
important to consider. Policymakers can
achieve the greatest GHG reductions by
focusing on those fuels and end-uses
which have modest rebound effects in %
and constitute a large portion of the
household’s budget.
Rebound research can be used to improve
energy forecasts, assess the costeffectiveness
of
energy
efficiency
investments, and target energy efficiency
efforts on those fuels and end-uses with
lower rebound effects.
This study quantifies the indirect rebound
effect and its relationship to the direct effect,
using literature estimates of the direct effect,
consumer demand theory, and the economic
input-output lifecycle assessment model
(www.eiolca.net) to estimate the direct and
indirect rebound effect for the average U.S.
household, using data from 2002.
We use direct rebound estimates from
literature and microeconomic properties to
model the indirect rebound effect. We
simulate direct and indirect rebound effects
for a hypothetical energy efficiency
investment, which saves either electricity,
gasoline, or natural gas for the average U.S.
household in 2004. We use U.S. Consumer
Expenditure survey data to model the pattern
of household re-spending of energy-cost
savings and distinguish between spending
the average dollar and the marginal (or next)
dollar.
The horizontal axis represents three policy goals for
efficiency such as (1) reducing a ton of GHG
emissions, (2) saving $107/year on energy bills in a
particular fuel, and (3) a 10% reduction in annual
energy bills with efficiency. The results show that
direct and indirect rebound effects in GHG emissions
are modest and vary by fuel and policy goal .
Financial Support
Financial support from the National
Science Foundation under grant SES034798 is gratefully acknowledged.
For more information contact:
Brinda Thomas
[email protected]
Ines Azevedo
[email protected]