Download Reducing rebound without sacrificing macroeconomic benefits of

Reducing Rebound Without Sacrificing Macroeconomic
Benefits of Increased Energy Efficiency
Karen Turner, Gioele Figus, Patrizio Lecca, Kim Swales
IAEE International Conference, Bergen 20-22 June 2016
EPSRC grant ref. EP/M00760X/1
Project title: ‘Energy Saving Innovations and Economy-Wide Rebound Effects’
What is rebound?
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𝑅 = 1− 𝑥100
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• Determined by ratio of actual energy savings to potential energy savings
following an energy efficiency improvement
• PES generally stated in terms of potential engineering or technical savings
• Increase efficiency by 10%, require 10% less physical energy input to
produce same level of production output or consumption utility
• AES depends on focus – direct rebound just energy use of more efficient
user; for economy-wide rebound, AES = all energy use across economy
Why economy-wide rebound?
• Rebound triggered by fact that reduced physical energy requirement
reduces price of delivering energy service
• Response to change in price gives us direct rebound
• But will trigger series of economic responses (zero rebound – no
economic response?)
• Our focus – economy-wide rebound
• Accompanies productivity or cost push expansion where energy
efficiency in production increases
• Or demand-led expansion when efficiency in household energy use
increases
Why does it matter?
• Primary aim of energy efficiency policy is to
reduce energy use and emissions
• But policymakers tend to operate in context
of multiple objectives
• Likely to welcome economic benefits that
drive rebound
• But need to know can delivery on energy and
emissions targets and commitments
• Do we need to live with limited economic
expansion if we want to maximise energy
savings?
Question: can we decouple economy-wide rebound and
economic expansion?
• Economy-wide rebound driven by same processes as economic
expansion
• Does this make rebound a necessary ‘evil’?
• Can we reduce rebound without sacrificing macroeconomic benefits
of increased energy efficiency?
• Focus of energy efficiency often simply on the most energy intensive
activities
• What if we increase energy efficiency in something that is a
competitor for a relatively energy-intensive activity?
• Focus on service demand and delivery (dematerialisation agenda)
For example, public vs. private transport in delivering mobility
• Experiment with UK CGE model: increase energy efficiency by 10% in
UK ‘Road and Rail’ public (and freight) transport sector
• Delivers expected benefits of a productivity led expansion – positive
impact on GDP, aggregate investment, employment, exports,
household income and consumption
• However, expansion accompanied by rebound in energy use across
economy
New household consumption structure in our UKENVI multi-sector
economy-wide CGE model
• Key focus of sensitivity analysis
• Impact of varying price elasticity
of substitution between Private
Transport and Road and Rail in
household consumption decision
• 0.5 in central case; vary 0.1→1.1
• KEY – MACRO LEVEL IMPACTS
ARE NOT SENSITIVE TO THIS
PARAMETER
Impacts on household decision
• When set very low, due to increased
income
• …and slight decrease in price of refined
fuel when demand falls with increased
efficiency in Road and Rail sector
• …households increase use of both public
and private transport
• But as elasticity/responsiveness to
increase competitiveness of public option
increases
• …demand for cars and refined fuels falls
from outset
Key result – we can decouple!
Policy implications?
• Concern – are cost savings from efficiency improvements in public
transport provision passed on through price faced by consumer?
• Could we get same result if, e.g. cost savings used to improve quality of
service rather than price?
• Attractiveness of public option key in any case - how do we get price
sensitivity to improve?
But, generally, result suggests
• As we make households more willing to substitute in favour of public
option
• Economy-wide rebound may be reduced while retaining macroeconomic
benefits
• Key – composition of household transport activity
Policy implications?
• Would we find similar if focus on efficiency/competitiveness of
delivery and/or use of other services?
• E.g. Heating: low carbon electricity vs. gas; LPG vs. oil off-grid
• Dematerialisation agenda – focus on (not just energy)
efficiency and competitiveness of delivery (and use) of
low carbon options in delivering energy (using) services to
deliver low carbon expansion
• With limited, or even ‘good’ rebound?
Thank you for listening
Questions?
[email protected]
EPSRC project web-site: http://cied.ac.uk/research/impacts/energysavinginnovations
Working paper linked to this presentation:
http://strathprints.strath.ac.uk/56448/