Rebound and disinvestment effects in refined oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector

In this paper, we use an energy–economy–environment computable general equilibrium (CGE) model of the Scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial Transport sector on the supply and use of energy. We focus our analysis on Scottish refined oil, as the main type of energy input used in commercial transport activity. We find that a 5% increase in energy efficiency in the commercial Transport sector leads to rebound effects in the use of oil-based energy commodities in all time periods, in the target sector and at the economy-wide level. However, our results also suggest that such an efficiency improvement may cause a contraction in capacity in the Scottish refined oil supply sector. This ‘disinvestment effect’ acts as a constraint on the size of rebound effects. However, the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector, particularly the substitutability of energy for non-energy intermediate inputs to production.     

Quantifying the rebound effects of energy efficiency improvements and energy conserving behaviour in Sweden

Doubts have recurrently been raised on the extent to which energy efficiency can reduce the demand for energy. Improvements in efficiency may cause so-called rebound effects by reducing the prices of energy services as well as by increasing the budget for consumption of other goods and services. The magnitude of such effects is crucial to whether energy efficiency should be a strategy for environmental policy or not. This paper aims to derive a general expression of the rebound effects of household consumption in a parameterised form where available data can be tested. The paper analyses how different parameter assumptions affect the quantification of rebound effects and what may be reasonable ranges. Income effects are quantified using data from the Swedish Household Budget Survey of different goods and services split on income classes. The changes in consumption patterns with increasing income are used to establish the composition of marginal consumption. Combined with energy intensities derived from input–output analysis, this gives a model of how money saved on energy use in one sector may lead to increased energy use in other sectors. The total rebound effects of energy efficiency improvements appear to be in the range 5–15% in most cases, but these results are fairly sensitive to assumptions of energy service price elasticities. Cases with low or negative capital costs for energy efficiency improvements may also result in much higher rebound effects as the income effects become more important. Energy-conserving behaviour (reduced energy service demand) affecting direct energy use such as heating and transport gives rise to rebound effects in the order of 10–20%, depending on the household expenditure per primary energy for different fuels and energy carriers.     

The role of built environment energy efficiency in a sustainable UK energy economy

Energy efficiency in the built environment can make significant contributions to a sustainable energy economy. In order to achieve this, greater public awareness of the importance of energy efficiency is required. In the short term, new efficient domestic appliances, building technologies, legislation quantifying building plant performance, and improved building regulations to include installed plant will be required. Continuing these improvements in the longer term is likely to see the adoption of small-scale renewable technologies embedded in the building fabric. Internet-based energy services could deliver low-cost building energy management and control to the mass market enabling plant to be operated and maintained at optimum performance levels and energy savings quantified. There are many technology options for improved energy performance of the building fabric and energy systems and it is not yet clear which will prove to be the most economic. Therefore, flexibility is needed in legislation and energy-efficiency initiatives.     

The effect of energy end-use efficiency improvement on China’s energy use and CO2 emissions: a CGE model-based analysis

With its rapid economic growth, China is now confronted with soaring pressure from both its energy supply and the environment. To deal with this conflict, energy end-use efficiency improvement is now promoted by the government as an emphasis for future energy saving. This study explores the general equilibrium effect of energy end-use efficiency improvement on China’s economy, energy use, and CO₂ emissions. This paper develops a static, multisector computable general equilibrium model (CGE) for China, with specific detail in energy use and with the embodiment of energy efficiency. In order to explore the ability of subsidizing non-fossil-generated electricity on moderating potential rebound effects, in this model, the electricity sector was deconstructed into five specific generation activities using bottom–up data from the Chinese electricity industry. The model is calibrated into a 16-sector Chinese Social Accounting Matrix for the year 2002. In the analysis, seven scenarios were established: business as usual, solely efficiency improvement, and five policy scenarios (taxing carbon, subsidized hydropower, subsidized nuclear power, combination of taxing carbon and subsidized hydropower, combination of taxing carbon and subsidized nuclear power). Results show that a sectoral-uniform improvement of energy end-use efficiency will increase rather than decrease the total energy consumption and CO₂ emissions. The sensitivity analysis of sectoral efficiency improvement shows that efficiency improvements happened in different sectors may have obvious different extents of rebound. The three sectors, whose efficient improvements do not drive-up total national energy use and CO₂ emissions, include Iron and Steel, Building Materials, and Construction. Thus, the improvement of energy end-use efficiency should be sectoral specific. When differentiating the sectoral energy-saving goal, not only the saving potential of each sector but also its potential to ease the total rebound should be taken into account. Moreover, since the potential efficiency improvement for a sector over a certain period will be limited, technology measures should work along with a specific policy to neutralize the rebound effect. Results of policy analysis show that one relatively enhanced way is to combine carbon taxing with subsidized hydropower.     

Impact of energy efficiency gains on output and energy use with Cobb–Douglas production function

A special issue of Energy Policy—28 (2000)—was devoted to a collection of papers, edited by Dr. Lee Schipper. The collection included a paper entitled “A view from the macro side: rebound, backfire, and Khazzoom–Brookes” in which it was argued that the impact of fuel efficiency gains on output (roughly, GDP) is likely to be relatively small by Cobb–Douglas production function. However, an error in the analysis leads to under-estimation of the long-term impact. This paper first provides a partial equilibrium analysis by an alternative method for the same case and then proceeds to an analysis on the issue in a two-sector general equilibrium system. In the latter analysis, energy price is internalized. Both energy use efficiency and energy production efficiency are involved.     

Empirical estimates of the direct rebound effect: A review

Improvements in energy efficiency make energy services cheaper, and therefore encourage increased consumption of those services. This so-called direct rebound effect offsets the energy savings that may otherwise be achieved. This paper provides an overview of the theoretical and methodological issues relevant to estimating the direct rebound effect and summarises the empirical estimates that are currently available. The paper focuses entirely on household energy services, since this is where most of the evidence lies and points to a number of potential sources of bias that may lead the effect to be overestimated. For household energy services in the OECD, the paper concludes that the direct rebound effect should generally be less than 30%.     

Empirical evidence of direct rebound effect in Catalonia

This paper reviews the empirical literature concerning the direct rebound effect in households; it briefly analyzes the main theoretical and methodological aspects, and finally estimates the magnitude of direct rebound effect for all energy services using electricity in households of Catalonia (Spain) using econometric techniques. The main results show an estimated direct rebound effect of 35% in the short term and 49% in the long term. The existence of a rebound effect reduces the effectiveness of energy efficiency policies.     

System-level energy efficiency is the greatest barrier to development of the hydrogen economy

Current energy research investment policy in New Zealand is based on assumed benefits of transitioning to hydrogen as a transport fuel and as storage for electricity from renewable resources. The hydrogen economy concept, as set out in recent commissioned research investment policy advice documents, includes a range of hydrogen energy supply and consumption chains for transport and residential energy services. The benefits of research and development investments in these advice documents were not fully analyzed by cost or improvements in energy efficiency or green house gas emissions reduction. This paper sets out a straightforward method to quantify the system-level efficiency of these energy chains. The method was applied to transportation and stationary heat and power, with hydrogen generated from wind energy, natural gas and coal. The system-level efficiencies for the hydrogen chains were compared to direct use of conventionally generated electricity, and with internal combustion engines operating on gas- or coal-derived fuel. The hydrogen energy chains were shown to provide little or no system-level efficiency improvement over conventional technology. The current research investment policy is aimed at enabling a hydrogen economy without considering the dramatic loss of efficiency that would result from using this energy carrier.     

An assessment of the energy tax burden on the Philippine economy

This paper uses an aggregate modelling approach to assess the impacts of a redistribution of the taxes and duties that currently exist on crude oil and refined petroleum products in the Philippine economy. The approach used in the analysis consists of a general equilibrium model composed of fourteen producing sectors, fourteen consuming sectors, three household categories classified by income and a government. The effects of replacing the taxes and duties on crude oil and refined petroleum products with a more broad-based tax on manufacturing and service sectors output on prices and quantities are examined. The results are revealing. For example, the consequences of redistributing the tax burden away from petroleum products to the manufacturing and service sectors of the Philippine economy would be an increase in output by all producing sectors of about 3.5% or about 2.4 hundred billion Philippine pesos, a rise in the consumption of goods and services by about 6.1% or 1.6 hundred billion Philippine pesos, a rise in total utility by 6.9% or 1.9 hundred billion Philippine pesos and virtually no change in tax revenue for the government. When subjected to a sensitivity analysis, the results are reasonably robust with regard to the assumption of the values of the substitution eleasticities. That is, while the model's equilibrium values do vary in response to different assumptions of the values of these elasticities, the fluctutations are not so enormous to suggest that the model is unrealistically sensititve to these parameters.     

Energy rebound and economic growth: A review of the main issues and research needs

Contrary to conventional wisdom, more efficient use of energy may actually through rebound effects lead to greater instead of less total consumption of energy—or at least to no diminution of energy consumption. If so, energy efficiency strategies may serve goals of raising economic growth and affluence, but as an environmental or energy policy strategy could backfire, leading to more resource use in absolute terms rather than less. This, in turn, could in the long run hamper economic growth, for instance if resource scarcity crowds out technical change. The hypothesis that rebound is greater than unity (‘backfire’) predicts the observed real-world correlation between rising energy consumption and rising efficiency of energy services, however difficult it may be to define a precise holistic metric for the latter. The opposing hypothesis, i.e. that rebound is less than unity and that energy efficiency increases therefore result in less energy consumption than before, requires on the other hand strong forces that do account for the empirically observed economic growth. This paper summarises some of the discussions around the rebound effect, puts it into perspective to economic growth, and provides some insights at the end that can guide future empirical research on the rebound topic.     

Split incentives and energy efficiency in Canadian multi-family dwellings

This paper examines the energy-related behaviour of owners and occupants of multi-family dwellings in Canada, some of whom do not pay directly for electricity or heat, but instead have these costs included in their rent or condo fees. Using data from the 2003 Survey of Household Energy Use, we look at the extent to which split incentives that result from bill-paying arrangements affect a variety of activities including the setting of temperatures at various times of the day and the use of eco-friendly options in basic household tasks. Findings suggest that these split incentives do indeed impact some aspects of occupant behaviour, with households who do not pay directly for their heat opting for increased thermal comfort and being less sensitive to whether or not somebody is at home and the severity of the climate when deciding on temperature settings. Regardless of who pays for utilities, Canadian households who live in multi-family dwellings are generally unresponsive to fuel prices. Our empirical results suggest the possibility of environmental benefits from policies aimed at improving energy-efficiency in this sector, especially if targeted at reducing the impacts of the behaviour of those who do not pay directly for energy use.     

White Certificates for energy efficiency improvement with energy taxes: A theoretical economic model

In this paper we analyze interactions of two energy policy instruments, namely a White Certificates (WhC) scheme as an innovative policy instrument for energy efficiency improvement and energy taxation. These policy instruments differ in terms of objectives and final impacts on the price of electricity. We examine the effect of these policy instruments in the electricity sector, focusing on electricity producers and suppliers in a competitive market. Using microeconomic theory, we identify synergies between market players and demonstrate the total effect on the electricity price when suppliers internalize the behaviour of producers in their decisions. This model refers to an ideal market situation of full liberalization. The cases we examine consist of electricity producers with and without a carbon tax, electricity suppliers with and without an electricity tax, and with WhC obligations. Furthermore, we present a parallel implementation of WhC for electricity suppliers with carbon tax on electricity producers and an electricity tax with WhC obligations to electricity suppliers. We demonstrate differences in optimization behaviour of producers and suppliers. Based on a couple of cases of WhC with carbon and electricity taxes, various positive and negative effects of both schemes in terms of target achievement and efficiency are present, which can lead to an added value of such schemes in the policy mix, although uncertainties of outcomes are quite high. A basic finding is that in a merit order several parameters can increase final electricity price after the implementation of different policies: demand for electricity and electricity supply cost at a large scale and then follow the level of level of obligation for energy saving, level of penalty, and price of WhC (representing the marginal costs of energy saving projects). The impact magnitude of parameters depends on the values chosen and on the initial position of suppliers (i.e. if their actual behaviour deviates from full compliance with targets).     

Can market oriented economic reforms contribute to energy efficiency improvement? Evidence from China

Since China accelerated its market oriented economic reforms at the end of 1992, its energy intensity has declined 3.6% annually over 1993–2005. However, its energy intensity declined 4.2% annually during its first reform period 1979–1992. Therefore, can we conclude that the accelerated marketization since the end of 1992 has made no contribution to its energy efficiency improvement? In order to answer this challenging question, we examine the changes of energy own-price elasticity, as well as the elasticities of substitution between energy and non-energy (capital and labor) in China during the periods of 1979–1992 and 1993–2003. Generally, in transition or developing economies, holding the technology and output level fixed, if the energy own-price elasticity (algebraic value) declines or the substitution elasticity between factors rises, they will contribute to energy efficiency improvement. Our empirical study finds that: (1) during 1979–1992, the energy own-price elasticity is positive (0.285), and capital-energy, labor-energy are both Morishima complementary; which indicates a distorted energy price and inefficient allocation; and (2) during 1993–2003, the own-price elasticity for energy is negative (−1.236), and capital-energy and labor-energy are both Morishima substitute. All factor demands become more elastic, and all elasticities of substitution increase. The implication is that the accelerated marketization contributes substantially to energy efficiency improvement since 1993.     

A two-factor method for appraising building renovation and energy efficiency improvement projects

The renovation of residential buildings usually involves a variety of measures aiming at reducing energy and building maintenance bills, increasing safety and market value, and improving comfort and aesthetics. A significant number of project appraisal methods in current use—such as calculations of payback time, net present value, internal rate of return or cost of conserved energy (CCE)—only quantify energy efficiency gains. These approaches are relatively easy to use, but offer a distorted view of complex modernization projects. On the other hand, various methods using multiple criteria take a much wider perspective but are usually time-consuming, based on sometimes uncertain assumptions and require sophisticated tools. A ‘two-factor’ appraisal method offers a compromise between these two approaches. The main idea of the method is to separate investments into those related to energy efficiency improvements, and those related to building renovation. Costs and benefits of complex measures, which both influence energy consumption and improve building constructions, are separated by using a building rehabilitation coefficient. The CCE is used for the appraisal of energy efficiency investments, while investments in building renovation are appraised using standard tools for the assessment of investments in maintenance, repair and rehabilitation.     

Barriers to improvements in energy efficiency

The growing recognition of the potential energy savings available through improvements in energy efficiency has sparked an increased interest in the actors involved in implementing these improvements and the barriers that they can encounter. This paper identifies these actors and creates a topology for the various barriers that hinder their efforts to achieve better energy efficiencies at the very lowest level of the energy consumer to the very highest level of the global financial agencies. The analysis concludes that four essential factors will help facilitate the dissemination of energy-efficiency improvements: relying on combinations of measures for overcoming each barrier to energy efficiency; using combinations of measures at the strategic level; employing policy-assisted, market-oriented mechanisms and promoting technological innovation as a means for achieving improved energy efficiency.     

Energy efficiency assessment and improvement in energy intensive systems through thermoeconomic diagnosis of the operation

Advanced monitoring techniques can play a key role in improving energy efficiency of operating energy intensive systems. In particular, thermoeconomic diagnosis aims at the determination of fuel consumption variation, the identification of causes of its increment from design conditions and the quantification of the effect of each one of these causes.     

Method for calculating annual energy efficiency improvement of TV sets

The popularization of 24 h pay-TV, interactive video games, web-TV, VCD and DVD are poised to have a large impact on overall TV electricity consumption in the Malaysia. Following this increased consumption, energy efficiency standard present a highly effective measure for decreasing electricity consumption in the residential sector. The main problem in setting energy efficiency standard is identifying annual efficiency improvement, due to the lack of time series statistical data available in developing countries. This study attempts to present a method of calculating annual energy efficiency improvement for TV set, which can be used for implementing energy efficiency standard for TV sets in Malaysia and other developing countries. Although the presented result is only an approximation, definitely it is one of the ways of accomplishing energy standard. Furthermore, the method can be used for other appliances without any major modification.     

Policies to reduce energy use and carbon emissions in the UK

The UK differs from may other industrialized nations in that its carbon dioxide (CO₂) emissions from energy use have declined in recent years despite relatively rapid economic growth. In all sectors but transport, substantial reductions have already occurred in the level of carbon emissions per unit of GDP output. At the same time, a number of official and unofficial studies have pointed out that the UK has one of the largest remaining potentials amongst comparable industrialized countries for achieving further CO₂ reductions through the implementation of cost-effective energy efficiency and fuel switching measures. This paper discusses past and present patterns of energy use and carbons emissions in the UK. The analysis then examines historical trends in UK energy policy and presents policy options for further reducing the UK's energy-use and carbon emissions in the future.     

Market barriers to energy efficiency

Discussions of energy policy in an environmentally constrained world often focus on the use of tax instruments to internalize the external effects of energy utilization or achieve specified reductions in energy use in the most cost-effective manner. A substantial literature suggests, however, that significant opportunities exist to reduce energy utilization by implementing technologies that are cost-effective under prevailing economic conditions but that are not fully implemented by existing market institutions. This paper examines the theory of the market for energy-using equipment, showing that problems of imperfect information and transaction costs may bias rational consumers to purchase devices that use more energy than those that would be selected by a well-informed social planner guided by the criterion of economic efficiency. Consumers must base their purchase decisions on observed prices and expectations of post-purchase equipment performance. If it is difficult or costly for individuals to form accurate and precise expectations, the level of energy efficiency achieved by competitive markets will vary from the socially efficient outcome. Such ‘market barriers’ suggest a role for regulatory intervention to improve market performance at prevailing energy prices.     

The role of energy efficiency in reducing Scottish and UK CO2 emissions

In 2003, the UK government launched its long-anticipated White Paper on energy, the centrepieces of which were ambitious targets for the production of electricity from renewable technologies and the long-term aspiration of a 60% reduction in UK greenhouse gas emissions by 2050. In the White Paper it was recognised that such a dramatic reduction in emissions will require significant changes in the way in which energy is produced and used. However there has been a general failure to recognise the fact that in order to meet emissions targets, the UK will have to significantly reduce its energy consumption; this is not helped by the general misconception in the UK that reductions in CO₂ emissions will occur simply by increasing the production of electricity from renewable sources.

Specifically, this paper highlights the current trends in renewables deployment and energy demand, with a specific focus on Scotland, where the authorities have set more ambitious renewables targets than the rest of the UK. As will be demonstrated in this paper, without energy demand reduction, the deployment of renewables alone will not be sufficient to curtail growth in UK CO₂ emissions. This is illustrated using a case study of the Scottish housing sector; whilst this case study is necessarily local in scope, the results have global relevance. The paper will also address the magnitude of energy savings required to bring about a reduction in emissions and assesses the status of the policies and technologies that could help bring such reductions about.