Rebound Effect

The Wicked Problem of the Rebound Effect: When Increasing Efficiency Doesn’t Reduce Consumption

Common sense and conventional wisdom tell us that increasing the efficiency with which we use natural resources should lower total consumption and help conserve those resources for other species and for future generations.

Visionaries have posited soaring “Factor 4” and “Factor 10” efficiency improvements, and even envisage “dematerialization,” by which population growth is “decoupled” from energy and resource throughput.  Theoretically, this would allow for unconstrained growth on a finite yet ever more bountiful Earth, with the planet and its precious biosphere liberated from humanity’s massive ecological footprint.

Contemporary environmentalism largely accepts this framework. Climate activists push for greater energy efficiency and replacing fossil fuels with renewables to reduce and eventually eliminate carbon emissions. Agricultural reformers debate whether GMOs or permaculture will most efficiently and safely feed Earth’s billions.

But what if our intuitions about efficiency are mistaken?

What if the hope that ever-increasing efficiency can allow us to “have our cake and eat it too” and save the Earth from human excesses amounts to wishful thinking?

Economists have long observed that using resources more efficiently often ends up increasing the total consumption of these same resources.  This seemingly contradictory phenomenon is known both as the rebound effect and the Jevons paradox, in honor of the English economist William Stanley Jevons (1835-1882). Jevons discovered that improved efficiency in the use of coal, as a result of technological innovation in a number of industries, eventually led to more – not less – overall coal consumption.  In view of this counterintuitive outcome, Jevons argued that technological advances and efficiency improvements alone could not be counted on to reduce the consumption of natural resources. 

What is going on here?

Economists define increased efficiency as less input of the resource in question per unit of economic output. In effect, this increases the relative supply of that resource. This in turn lowers its relative cost, which induces greater demand for it. This “rebound effect” offsets some or all of the expected reduction in aggregate resource consumption from improved efficiency. The Jevons Paradox in particular occurs when increased demand predominates (i.e., more than offsets efficiency gains), leading to higher overall resource consumption.

Another example can be seen with the per capita water consumption improvements in recent decades in the arid American Southwest, due to increased efficiency and conservation measures. Perversely, the “new” supply of water made available by these efficiency measures mainly served to encourage additional population growth and suburban sprawl.

The rebound effect can manifest in various ways:

  1. Direct rebound effect
    When the efficiency of a specific resource or product improves, it often becomes more affordable to use. This can lead to consumers using the resource more frequently or for longer periods, offsetting the potential environmental benefits. (This dynamic may benefit individual consumers, but the aggregate effect in the context of a large and growing human population is to increase environmental impacts.) For example, if vehicles become more fuel-efficient, people may choose to drive more often or cover greater distances, negating the potential reduction in fuel consumption and emissions.
  2. Indirect rebound effect
    Efficiency improvements in one area can also lead to increased consumption in other areas. For instance, if someone saves money on their energy bill due to improved insulation in their home, they might use those savings to purchase additional goods or services. This can result in a net increase in overall resource consumption and environmental impacts.
  3. Economy-wide rebound effect
    When efficiency improvements lead to lower costs and increased demand for resources at a macroeconomic level, it can result in higher overall consumption of resources. This increases environmental impacts, even if individual products or services are more efficient.

What can be done about the rebound effect?

As Henry Thoreau said in Walden, “In the long run men only hit what they aim at. Therefore, though they should fail immediately, they had better aim at something high.” Reducing our environmental impacts to sustainable levels and leaving sufficient habitat and resources for other species must be explicit and primary goals. Human societies won’t achieve them as an automatic byproduct of things we consider more important.

The most powerful tool to combat the rebound effect and move toward ecological sustainability is to stabilize the human population. If the human population continues to grow, resource efficiency will just be used to provide for additional people, rather than to reduce our overall environmental impact. And with humanity deep into ecological overshoot, lower overall impact must be our actual environmental objective.