How Large is the Economy-Wide Rebound Effect?

The size of the economy-wide rebound effect is crucial for estimating the contribution that
energy efficiency improvements can make to reducing greenhouse gas emissions and for
understanding the drivers of energy use. Economy-wide rebound from an energy
efficiency improvement includes changes in the use of energy to produce complementary
and substitute goods or inputs and other flow-on effects that affect energy use across the
economy as well as the direct rebound due to energy users using more of an energy
service that has become less costly as result of improved energy efficiency. Jevons first
argued in 1865 that improvements in energy efficiency increase total energy use, and in
recent decades researchers have argued for and against this “backfire” hypothesis.
Theory provides some guidance on the factors affecting rebound but does not impose
much constraint on the range of possible responses. Historical evidence suggests that
the improved energy efficiency of recent technology has not reduced energy use because
consumption has shifted to more energy-intensive goods and services. Simulations and
econometric research have produced mixed results. Some recent general equilibrium
studies find large rebound, around 100%, but more research is needed to confirm or refute
these findings.