5.3 The rebound effect
When individuals or organisations implement energy efficiency improvements, they usually save money as well as saving energy. However, if the money saved is then spent on higher standards of service, or additional energy-consuming activities that would not have otherwise been undertaken, then some or all of the energy savings may be eliminated. This tendency is sometimes known as the 'rebound effect'. For example, if householders install improved insulation or a more efficient heating boiler, they should in principle reduce their heating bills. However, if they instead maintain their homes at a higher temperature than before, or heat them for longer periods, the savings may be wholly or partly negated. Alternatively, they may decide to spend the money saved through lower heating bills by taking a holiday involving air travel. Since air travel is quite energy-intensive (see Figure 49) once again the energy savings will be offset by increased consumption, albeit of a different kind.
In devising national policies to encourage energy efficiency improvement, governments need to take the rebound effect into consideration. In some cases, it may mean that the energy savings actually achieved when energy efficiency measures are implemented are less than expected. Another policy implication is that citizens should be given incentives to spend any savings they make through implementing energy efficiency measures in ways that are energy-frugal rather than energy-intensive.