Energy efficiency and economy-wide rebound effects: A review of the evidence and its implications

The majority of global energy scenarios anticipate a structural break in the relationship between energy consumption and gross domestic product (GDP), with several scenarios projecting absolute decoupling, where energy use falls while GDP continues to grow. However, there are few precedents for absolute decoupling, and current global trends are in the opposite direction. This paper explores one possible explanation for the historical close relationship between energy consumption and GDP, namely that the economy-wide rebound effects from improved energy efficiency are larger than is commonly assumed. We review the evidence on the size of economy-wide rebound effects and explore whether and how such effects are taken into account within the models used to produce global energy scenarios. We find the evidence base to be growing in size and quality, but remarkably diverse in terms of the methodologies employed, assumptions used, and rebound mechanisms included. Despite this diversity, the results are broadly consistent and suggest that economy-wide rebound effects may erode more than half of the expected energy savings from improved energy efficiency. We also find that many of the mechanisms driving rebound effects are overlooked by integrated assessment and global energy models. We therefore conclude that global energy scenarios may underestimate the future rate of growth of global energy demand.