Considering the welfare impacts of energy efficiency and rebound

Improving energy efficiency is widely accepted as one of the most cost-effective means to reduce CO2 emissions through reduction in fossil fuel energy consumption (IEA, 2014a). However, the benefits are not limited to energy and greenhouse gas emission savings. There are other considerable benefits from improving energy efficiency that are now being coined the ‘multiple benefits of energy efficiency’ (IEA, 2014b). These benefits extend from individual level to regional and national level and across economic, social and environmental outcomes. Notwithstanding this, the merit of energy efficiency as a mitigation measure is regularly called into question with allusions to the ‘rebound effect’. Rebound occurs when the realised reduction in energy demand is less than the engineering estimates predict, because of price and income effects occurring directly or indirectly in different areas of the economic system. The research question in this paper is whether energy efficiency rebound effects are in fact welfareenhancing from a societal perspective. We go a step further and propose that without rebound, the benefits of energy efficiency would be limited to the single vector of energy use.