REBOUND EFFECT

Improvements in energy efficiency are welfare improving insofar as they reduce the unit cots of energy services. Yet for the same reason, policy measures that target increased energy efficiency are often a blunt instrument for addressing climate mitigation and other environmental objectives owing to the so-called “rebound effect.” In essence, the rebound effect leads people to consume more energy by lowering its cost. For example, by reducing the per kilomenter costs of driving, increased fuel efficiency may encourage motorists to drive more, thereby offsetting the emission reduction from the technological improvement. In addition to economic factors, psychological causes also account for the rebound effect, e.g. through moral licensing: the good feeling of saving resources in one area can tempt people to waste resources in other areas. The competence area has been researching both the theoretical underpinnings of the rebound effect as well as empirical applications, from light bulb usage to mobility.