Do increases in energy efficiency improve environmental quality and sustainability?

Hanley, N. , McGregor, P. G., Swales, J. K. and Turner, K. (2009) Do increases in energy efficiency improve environmental quality and sustainability? Ecological Economics, 68(3), pp. 692-709. (doi: 10.1016/j.ecolecon.2008.06.004)

Abstract

Governments world-wide increasingly see energy efficiency as an important aspect of sustainability. However, there is a debate in the literature as to whether the impact of improved energy efficiency on reducing energy use might be partially, or more than wholly, offset through “rebound” and “backfire” effects. This paper clarifies the theoretical conditions under which such effects would occur and explores their likely significance using a computable general equilibrium (CGE) model of the Scottish economy. We find that for Scotland a general improvement in energy efficiency in the production sectors of the economy initially produces rebound effects that eventually grow into backfire. Energy use ultimately increases in response to an efficiency gain and the ratio of GDP to CO2 emissions falls. The economic factors underpinning rebound effects are straightforward: energy efficiency improvements result in an effective cut in energy prices, which produces output, substitution, competitiveness and income effects that stimulate energy demands. However, the presence of strong rebound or even backfire does not mean that efficiency-enhancing policies are irrelevant: rather it suggests that such policies operating alone are insufficient to generate environmental improvements. The implication is that a co-ordinated portfolio of energy policies is required.

• Item Type: Articles
• Additional Information: The research reported here was initially funded by the Scottish Economic Policy Network (Scotecon award 500104) and by the ESRC under the grant (No. R000 22 3869) ‘Modelling the Impact of “Sustainability” Policies in Scotland’. However, this research draws liberally on related research funded by the EPSRC through the SuperGen Marine Energy Research Consortium (Grant reference: GR/S26958/01) and by the ESRC through the First Grants Initiative (Grant reference RES-061-25-0010).
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Hanley, Professor Nicholas
• Authors: Hanley, N., McGregor, P. G., Swales, J. K., and Turner, K.
• College/School: College of Medical Veterinary and Life Sciences > School of Biodiversity, One Health & Veterinary Medicine
• Journal Name: Ecological Economics
• Publisher: Elsevier
• ISSN: 0921-8009
• ISSN (Online): 1873-6106
• Published Online: 09 July 2008