ABSTRACT
The term “rebound effect” refers to an unintended increase in the demand for energy and/or resources as a result of steps being taken to reduce that demand, for example, through efficiency improvements. The rebound effect can be explained by the following process: Technological progress makes the production process more efficient. Less energy and sometimes also resources are needed to produce the same amount of products and services. However, because of increased efficiency the costs of production decrease, which also can reduce the cost of the final product. A price decrease normally leads to increased consumption of the now-cheaper product or other products. As the demand increases, so does energy consumption and resource use. Thus, some of the energy savings from the efficiency improvement are lost. A rebound effect of (say) 10% means that 10% of the energy efficiency improvement initiated by the technological improvement is offset by increased consumption. Other examples of rebound effects include how building new roads to improve traffic stimulates more car use, or how voluntary reductions in some activity (like traveling) result in increased spending on some other (environmentally harmful) activity. The rebound effect can even backfire, which means that it is larger than the initial efficiency gain, resulting in a net negative efficiency gain.
