Graham Armstrong, an energy and environmental consultant and policy advisor in Canada and Australia as well as a longtime friend of EiD, has written a good article on energy efficiency, in reaction to an article in The Economist in late October. What are your views?
Energy efficiency and “rebound” effects
In The Economist, 25 October 2018, the debate regarding the impact of energy efficiency improvement (EEI) on energy use was revisited. The article first quoted Jevons’ 1865 prediction that EEI of steam engines would increase demand for coal as steam engine costs per mile decreased, a “rebound” effect.
Firstly, analysis must distinguish between micro rebound, the energy use change when costs of a specific energy service such as steam raising or lighting reduce due to EEI, and elasticity impact. Micro rebound results in net economic benefits for consumers and some re-spending of savings on energy.
Secondly, the impact of macro rebound as EEI improves energy productivity in the overall economy, thereby increasing demand for a range of activities, including energy services, as incomes and profits increase and there is some re-spending of savings on energy.
But incomes and profits increase as a result of many factors, not just EEI. Steam engine use increased in the 19th and the first half of the 20th century as a result of overall economic growth which was only partly driven by EEI in a range of energy services. Hence, increased coal use resulted from a range of contributing factors.
Three examples have tended to dominate micro rebound discussions. These are outlined and discussed below.
- EEI in automobiles can, by reducing the cost per distance unit travelled, increase a given pre-EEI demand for travel, just as fuel cost reductions, income and congestion can. Studies on the impacts of each factor are inconclusive. And travel may be constrained by fixed schedules and travel time availability.
- Lighting EEI by the use of CFLs and LEDs is likely to result in micro rebound, but increased lighting energy use can also increase due to lighting preferences and illumination standards in residential, commercial and industrial applications.
- Space comfort (heating, cooling) EEI can result in micro rebound as costs of space comfort per m2 (or m3) reduce as a result of EEI in building shells, appliances and equipment. But energy use per m2 or m3 can also result from space comfort preferences, income and technology changes.
In other areas where EEI is applied, such as manufacturing processes, electric motors and refrigeration, it is often difficult to disentangle EEI from other factors. For example, in residential refrigeration the size, features and penetration rates (often over 1.5/household) increase energy use, largely independent of EEI.
The Economist article quoted S. Rausch and H. Schwerin from the Swiss Federal Institute of Technology in a recent study reported that between 1960 and 2011 in the United States that efficiency gain added to total energy use offsetting 102 per cent of the savings. The EEI was defined as technological progress over the period from frozen EE in 1960 and the relative cost of energy and capital. But it is not clear how price and income effects were taken into account and the study assumed easy substitution of capital and labour with energy which is unlikely. And all technological progress is not directly related to EEI, much to stock turnover and overall productivity improvements.