"Energy efficiency and the ‘rebound effect’"
Goldstein and Cavanagh join in the debunking of the Breakthrough Institute, which “fails to back up its accusations with facts”
Energy efficiency saves energy, increases electric reliability, avoids the need to build new power plants, and saves Americans money. It’s really that simple.
Some of the nation’s top energy experts have debunked the Breakthrough Institute’s false assertions and misleading statements about energy efficiency. Now two more leading experts, David Goldstein and Ralph Cavanagh, weigh in with their analysis. They are co-directors of NRDC’s energy program, and each has been working to implement energy efficiency at the national and state level since the 1970s. Their piece is repoted below, followed by Goldstein’s discussion of California’s experience.
Throughout almost four decades of societal progress in getting more work out of less energy, those who deny the promise of energy efficiency have persisted in a bizarre claim: Any energy savings from efficiency are offset by activities that demand additional energy consumption.
While implausible concerns about “rebound effect” have been around since the mid-nineteenth century, they have not impeded recent progress in improving the efficiency of energy use and reducing its environmental impacts.
The most obvious rebuttal to “rebound effect” claims is the performance of the US economy since the early 1970’s: Between 1973 and 2009, US economic production more than tripled even as total US energy use increased by less than a third. If “rebound effect” advocates were right, that record would have been flatly impossible, since savings in energy use would be offset by activities that demand energy, keeping energy use trends in lockstep with economic growth (just as they were for the first three decades after World War II).
That was indeed the confident prediction of some economists when we began our careers in the mid-1970s, and such forecasts lie today on the ash heap of history — along with hundreds of unmourned power plants that never had to be built and mines that never had to be dug.
Yet the same discredited thesis has resurfaced recently in reports by The New Yorker writer David Owen and the iconoclastic Breakthrough Institute, which today released a report subtitled, “A Review of the Literature” [translation: “don’t expect anything new”]. In the report, the Institute acknowledges that, “truly cost-effective energy efficiency measures should be vigorously pursued as they will lead to an improvement in the general welfare.” Since we agree entirely with that conclusion, it is tempting to end the discussion there, but the authors of the study also insist that the “rebound effect” will deny the global environment any benefits following that “improvement in the general welfare,” so an additional word is in order.
We reject the Institute’s implication that there is some kind of emerging academic consensus around the “rebound effect.” To the contrary, the most respected academic energy efficiency think tanks such as the UC Davis Center on Energy Efficiency and Stanford’s Precourt Institute on Energy Efficiency share the view that energy efficiency delivers big economic and environmental benefits. The reality is that energy efficiency is a huge success story and a key tool to reducing global warming, increasing electric reliability, slashing energy bills for those consumers who can least afford them, and avoids the need to build new costly power plants.
The Breakthrough Institute blames a host of evils on efficiency, but fails to back up its accusations with facts. It acknowledges that serious energy analysis of rebound effects shows them to be “comparatively trivial.” People who insulate their houses don’t absorb all the savings by sweltering through the winter, and buyers of efficient refrigerators don’t start leaving the doors open gratuitously. But after admitting that studies show rebound effects to be small and getting smaller over time, it tries to create a counter-narrative by inserting warnings that “the available evidence to date remains too limited to draw precise conclusions.”
Efficiency does not mean restraining energy services growth. It means using less for the same amount of service. The skeptics are confusing this trend with the sometimes-on, sometimes-off trend towards more efficiency, and claiming that more efficiency induces more demand for energy services.
The problem is that neither Owen nor the Breakthrough Institute has presented any evidence that this is happening in the real world: all of their examples are devoid of any mention of how efficiency leads to demand for activities that demand more energy, as opposed to other economic factors. Instead, they rely on na¯ve interpretations of economic theory””the same interpretations that show that cost effective energy efficiency is impossible.
Given the weaknesses of this form of economic theory for the purposes of efficiency analysis, it is even more important than usual to rely on data. The clearest data-focused test of the “rebound” hypothesis is whether an economy that embarks seriously on efficiency policy really can cut its overall energy use. Because without question, if the thesis has any plausibility at all, the answer has to be “no”; or at least “not nearly as much as predicted.”
Fortunately for the cause of economic truth, we have such experiments. California, for one, embarked on a broad set of policy reforms to encourage efficiency and promote renewable energy in 1974.
The influence of energy efficiency policies are helping the whole California economy (California would be the 8th largest national economy in the world if it were a nation) to save much more than one would expect. California is not the only example of a state or country promoting efficiency through policy and then showing divergent usage trends from its neighbors and thus demonstrating that energy really is saved. Perhaps this is why serious studies have found that the economy-wide rebound effect is trivially small.
In my blog [reposted below], I show how California’s projected savings from energy efficiency programs, derived year by year in real time by the California Energy Commission, have resulted in 15 percent reductions; and these programs have resulted in 40 percent reductions compared to the rest of the country.
California is just one example. Other states and several countries that have pursued efficiency policies also demonstrate lower energy usage and growth than those that did not so implement such policies.
Energy efficiency saves energy, increases electric reliability, avoids the need to build new power plants, and saves Americans money. It’s really that simple.
— David Goldstein and Ralph Cavanagh
Goldstein’s Switchboard piece on California, “Some Dilemma: Efficient Appliances Use Less Energy, Produce the Same Level of Service with Less Pollution and Provide Consumers with Greater Savings. What’s Not to Like?” is also worth reading and so is excerpted below.
In The Efficiency Dilemma, The New Yorker (December 20, 2010), David Owen revives a discredited 19th century article on economics to posit that the increasing efficiency of household products such as refrigerators and air conditioners is responsible for a range of problems, including everything from food waste to America’s culture of excess. Owen argues (apparently seriously) that by allowing consumers to save money that would otherwise go to high and wasted energy bills, efficient appliances have caused Americans to abandon the simple life.
Owen – whose expertise lies in the unrelated field of golfing (I’m not making this up), has unfortunately cobbled together this thesis without the benefit of facts or data. In the real world, efficient appliances (and the laws and policies that make them increasingly efficient) play a major role in reducing household energy usage, slashing energy bills for those consumers who can least afford them, and avoiding the need to build new costly power plants. Sad to say, this article – however well-intentioned, is a great example of misguided pseudo-analysis that is based on rank speculation made worse by gross errors of fact.
The reality is that the increase in efficiency of appliances is a huge success story for all consumers who benefit from the savings these products provide. Refrigerator energy use was growing with a trend that would have resulted in electricity demand of about 175 GW by today; but with efficiency policies that level of power demand was cut to less than 15 GW. The difference, about 160 GW, compares to about 125 GW provided by the entire nuclear power fleet in the United States, or to 400 large coal plants that were expected to be needed but now are not….
Owen starts by conceding that serious energy analysis of rebound effects shows them to be “comparatively trivial.” People who insulate their houses don’t absorb all the savings by sweltering through the winter, and buyers of efficient refrigerators don’t start leaving the door open gratuitously. But after admitting that the serious studies show rebound effects to be small and getting smaller over time, he does nothing to address the finding of the studies but instead starts writing a fairy-tale story of how efficient refrigerators don’t really save energy because somehow efficiency is responsible for the growing size of refrigerators, the increasing extent of refrigeration, and even the growing girth of Americans. The author notes how the size and feature offerings of refrigerators increased rapidly from 1954 until recently, and then, with out-of-the blue imagination, tries to link this to efficiency increases.
The facts stubbornly contradict this hypothesis, however. Figure 1 shows that trend in refrigerator size and energy use. What leaps out from the graph is that the big, fast increase in size (the red line) occurred WHEN EFFICIENCY WAS DECLINING. When efficiency began to improve, after 1972, the trend toward increasing size SLOWED DOWN. This is positive evidence that the rebound hypothesis is false, at least for refrigerators, Owen’s first example of choice. The growth in energy services in home refrigerators evidently has at best no relationship to efficiency, or even worse for this author’s point, is INVERSELY CORRELATED: the evidence suggests that greater efficiency implies more satiation with energy services.
Owen then refers to the great increase in refrigeration in stores, a phenomenon he asserts but does not demonstrate to be true, somehow trying to relate it to the efficiency of home refrigerators. A more plausible speculation is that it had to do with the trend towards suburban sprawl, where the absence of retail food stores within walking distance of homes leads to people making longer trips to the grocery store at less frequency and (necessarily) picking up more food each time. Even this explanation does not necessarily imply that the shelf area that is refrigerated must, or did, increase. And when Owen refers to the kitchen of a friend of his with multiple refrigerators and freezers, he apparently is unaware of the fact that there were already 15% more home refrigerators than homes in 1973 when refrigerator efficiency was at its low point. The number is hardly different today.
The speculation then extends to air conditioners. Did air conditioning get much more common after 1960 because the cost of cool air went down? The facts are that the EFFICIENCY of air conditioners was not regulated until 1978 and even then only at the state level. National standards for air conditioners did not take effect until 1992. So to support his hypothesis, the author would also have to show that air conditioners’ market share started to rise in 1992, which he doesn’t do. In large part because it is not true.
Instead, he uses cooling as an example of how demand for energy services can grow. But this is undisputed, and is included in every forecast of energy use with or without efficiency policies. Efficiency does not mean restraining energy services growth. It means using less for the same amount of service. The author is confusing this trend with the sometimes-on sometimes-off trend towards more efficiency, and claiming that more efficiency INDUCES more demand for energy services. Again, this is what the serious studies were addressing when they found the effect to be “comparatively trivial.”
The problem is that he has not presented any evidence that this is happening in the real world: all of the examples he talks about (at great length) are devoid of any mention of how one could relate the energy service demand growth to efficiency as opposed to other economic factors. He does not even say HOW one could do so, much less present evidence that someone has really done so.
The clearest test, though, of the author’s hypothesis is whether an economy that embarks seriously on efficiency policy really can cut its overall energy use. Because without question, if the author’s thesis has any plausibility at all, the answer has to be “no”; or at least “not nearly as much as predicted.
Fortunately for the cause of economic truth, we have such an experiment. California embarked on a broad set of policy reforms to encourage efficiency and promote renewable energy in 1974.
Figure 2 shows the expected results: the ones Owen claims should not show up in overall consumption data. These are the projected savings from energy efficiency programs, derived year by year in real time by the California Energy Commission.
Figure 3 shows the realized results for the whole California economy. As you can see, the reduction in electricity use compared to the rest of the US is not smaller than the projections, it is bigger. Figure 2 shows efficiency programs to have resulted in a 15% reduction in usage, but Figure 3 shows an actual reduction of 40% compared to the rest of the country (which itself saw reductions in electricity use due to efficiency).
So if anything is rebounding, it is the influence of energy efficiency policies””they are causing a whole economy (California would be the 8th largest national economy in the world if it were a nation) to save much more than one would expect. California is not the only example of a state or country promoting efficiency through policy and then showing divergent usage trends from its neighbors and thus demonstrating that energy really is saved. Perhaps this is why the serious studies to which Owens referred found that the economy-wide rebound effect is trivially small.
And more detailed versions of this graph also refute Owen’s attempt to claim that energy use really would be increasing if we also consider the energy use embedded in things we used to manufacture domestically but now import. The detailed version looks separately at residential, commercial, and industrial uses of electricity in California compared to the rest of the nation. The graph looks just the same. So while one can still argue about how much different the industrial sector would look if we added in Chinese imports, clearly we are not importing buildings or the operation of our lights and appliances.
This is not inconsistent with theory. One of the biggest impediments to saving energy is that it is so small a fraction of GDP””the author suggests 6%. This is too small for people to pay much attention to. So not only do people ignore efficiency, absent policy, they ignore conservation as well. Thus we see stories like our own office’s experience with efficient lighting. When NRDC moved into a new space in San Francisco in about 1988, we negotiated with the landlord to pay for a much more efficient lighting system by agreeing to pay the extra up front but then reap the savings in utility bills compared to an agreed upon baseline every month. To determine savings, the landlord metered our lighting.
But the fact that we were paying for the lights, and the visible reminder that the lighting was special and efficient (it looked much better than inefficient building standard lighting) caused our staff to cut the hours of operation by over half compared to the baseline. We not only got the savings from efficiency, but they were redoubled by behavior changes, even though we did or said nothing to encourage this behavioral change.
Efficient appliances save energy, reduce energy bills and rates, avoid the need to build new power plants, and save Americans money. It’s really that simple.
— David Goldstein