The proposed project seeks to estimate the energy and carbon savings from various types of energy efficiency improvement within the UK, and to investigate how these may be offset by various types of rebound effect. It seeks to expand and add value to the growing research on the topic of rebound effects, including in particular the research that currently being conducted by the Centre on Innovation and Energy Demand (CIED).

Rebound effects occur where the potential energy savings from efficiency-enhancing innovations are partially (or wholly) offset by a variety of economic responses to cheaper energy services. For example, if a household installs a condensing boiler that uses less gas to produce a given amount of hot water, this may encourage them to heat their homes for longer and/or to a higher temperature, thereby offsetting some of the potential energy savings. This is termed a direct rebound effect. In addition, any money saved on gas bills will be spent on other goods and services, such as buying a new TV. This changed and additional consumption may involve direct energy use by the household, but also indirect use of the energy that is 'embedded' in all goods and services from different stages of their supply chain, both in the UK and abroad. These are termed indirect rebound effects. Moreover, shifts in consumption patterns may also change the demand for locally produced and imported goods relative to exports, thereby impacting on economic activity, prices, incomes, energy consumption and carbon emissions in a range of markets and regions. These are termed economy wide rebound effects.

Similar mechanisms apply to cost-effective energy efficiency improvements by producers, such as steel manufacturers. Energy efficiency improvements lower the marginal cost of energy services, thus encouraging increased use of those services by the producer. Lower input costs permit reductions in output prices, which will in turn increase output, boost productivity and improve competiveness both in the sector where efficiency improves and down-stream (e.g. in white goods manufacture). This will encourage increased activity and energy use throughout the economy. Again, a variety of indirect and economy-wide rebound effects will come into play as prices and incomes adjust and as production and consumption decisions change. The net effect of these various mechanisms may be very significant and could potentially undermine achievement of the objectives of UK energy efficiency policies.

However, while the existence of such effects is well established, the evidence on the size of these effects remains limited, contradictory and controversial. The lessons learned have also proved to difficult to communicate to policy and stakeholder audiences, with the result that rebound effects continue to be widely ignored and/or misunderstood.

The current CIED research applies a range of techniques to estimate the direct rebound effects for individual energy services. However, this is only a part of the story - and potentially just a small part. The proposed project will add value to this activity by: first, extending the focus from individual sectors and services to the whole UK economy; second, by including the impacts on energy use and emissions along international supply chains; and third, incorporating a much wider range of economic mechanisms. It will investigate the impacts of improved efficiency in both industrial and household energy use, focusing in particular on the role of investment and energy supply decisions in determining different elements of rebound. The central aim is to clarify and advance the knowledge and evidence base regarding the source, nature, determinants and magnitude of direct, indirect and economy-wide rebound effects from different types of energy-saving innovations in different sectors. Moreover, the project aims effectively to communicate the implications of the results to various audiences.

Potential Impact:
Improved energy efficiency is of critical importance to regional, national and international attempts to address climate change. It is therefore essential that energy efficiency policies deliver substantial energy and emission savings. This is not always been the case in the past, owing in part to problems with the design and implementation of those policies, and in part to a variety of unintended consequences that generally go under the heading of rebound effects. If future policies are to be effective, it is essential that those rebound effects are better understood, allowed for and addressed.
To date, rebound effects have been largely ignored by policymakers and other stakeholders, with the result that the energy and emission savings from different policy options have frequently been overestimated. This results in part from the limited evidence base that is available and the corresponding uncertainty over the magnitude of rebound effects in different sectors. During our previous programme of research on this topic (e.g. Turner's ESRC First Grant) we achieved substantial impact with key stakeholders (e.g. Scottish Government, DEFRA, DECC) in terms of improved understanding of rebound mechanisms and their related implications for economic development. We intend to build upon this impact within the present proposal.
We have identified two streams of potential impact and have proposed a comprehensive programme of stakeholder engagement, embedded within the research process, to help realise this:
First, we aim to significantly raise awareness and improve understanding of rebound effects within different stakeholder groups. For many stakeholders, awareness of rebound effects is currently confined to direct rebound effects for specific household energy services - notably 'comfort taking' following household insulation improvements. Attention also tends to be focused upon short-term impacts within the UK's borders. Our work and engagement activities will: highlight the broader, indirect and economy wide, rebound effects following such improvements; extend the focus to the global level and over the longer term; and highlight the potential trade-offs and implications for UK climate policy and (sustainable) economic growth.
Second, we aim to facilitate knowledge exchange on applied multi-sector economy-wide modelling. The application of these techniques is essential if rebound effects are to be more fully understood and some progress is now being made. For example, both DECC and the Scottish Government are in the process of developing capacity in CGE modelling for energy and climate policy analysis. We are also collaborating with colleagues in the Energy Efficiency Deployment Office at DECC on the development of CGE models for analysing household energy efficiency policy, together with colleagues in the Scottish Government who have adopted our CGE framework for economic modelling. The proposed project would greatly enhance the impact generated within these collaborations, both through model development and specification as well as through research results.
Impact will therefore build upon our existing links with key stakeholders such as DECC, DEFRA, the Scottish Government, the IEA Energy Efficiency and Environment Division, the EC Joint Research Centre Institute for Energy and Transport and other stakeholders. Additional stakeholders will be identified through a mapping exercise and engagement and impact strategy for those stakeholders will be developed. This is outlined further in the Pathways to Impact and includes: the formation of a small project Advisory Group; the organisation of three stakeholder workshops (in London and Glasgow); the publication of three policy briefs; wide-ranging media coverage of project results; blog posts; social media activities; extensive participation in workshops and seminars; and other knowledge exchange activities.