The Rebound Effect in a More Fuel Efficient Transportation Sector

Abstract

Energy efficiency measures are typically met with a small but often persistent ‘rebound effect’ that manifests itself across various spheres: Install a more efficient air conditioning unit, lose some of the savings by setting the temperature lower. Buy a more fuel efficient car, visit grandma more often.

The rebound effect has troubled energy analysts and economists for over a century. Sometimes it is also called the “Jevons Paradox,” after William Jevons who, in the 19th century, hypothesized that efficiency improvements will only backfire and lead us to use more resources overall. In fact, the Jevons Paradox acts in the extreme long run—over decades, centuries, and millennia—and might be better thought of as economic growth, progress.

There is also substantial evidence of a rebound effect in the relative short run—over days, weeks, and months. The magnitudes are much smaller, in order to magnitude closer to 10 percent: after taking into account a rebound effect of such a magnitude, we are still left with 90 percent of original energy efficiency savings. (In contrast to Jevons’s extreme long run and the short run observed immediately, we will also introduce the “long run,” a measure often applied to months and years, when some conditions such as where someone lives relative to one’s work are adjustable.)

An important example is the case of vehicle fuel efficiency improvements through Corporate Average Fuel Economy (CAFE) standards. As miles-per-gallon ratios improve, owners of more fuel-efficient cars may well be driving more as their fuel cost per mile travelled decreases.

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Ruiwen Lee
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I am an environmental economist.