How badly does the rebound effect undercut energy efficiency?

Improvements in energy efficiency likely won't see your meter increasing overall.

State of Washington, Department of Ecology

Give everyone fuel-efficient cars and we’ll use less fuel, right? According to some economists—and opponents of mandated improvements in energy efficiency—we'll squander some of the savings by driving more. That argument goes for other forms of energy efficiency, suggesting they all can actually lead to greater energy use through a rebound effect. However, a group of economists and others, led by Kenneth Gillingham of Yale University, argue in a new Nature commentary that the rebound effect is exaggerated.

According to their article, the effect is real but small: 5 to 30 percent of energy savings may be lost due to greater use. At most, this could reach a little over half of intended savings lost on large scales—but energy is still saved overall. These numbers are supported by many (“vast” is the word used by the authors) academic studies and simulations.

To be fair, the rebound effect is not simple. It actually comes about via four factors that interact and combine in a complex manner. The first is the “direct” effect, where a drop in the cost of using some energy-consuming device (like a car or washing machine) results in slightly increased use. For cars, various studies show that this reduces savings in energy from the improved efficiency by 5 to 23 percent initially. After everyone becomes accustomed to the lower fuel costs, this could eventually rise to 30 percent.