ENERGY EFFICIENCY

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

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2036

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2047

2048

2049

2050

0

5

10

15

20

25

30

35

40

45

50

55

60

Renewables 17%

Nuclear 6%

Power generation efficiency and fuel switching 5%

End-use fuel switching 15%

End-use fuel and electricity effi-ciency 38%

450ppm - BLUE

Gt C

O2

BLUE Map emis-sions 14 Gt

Baseline emissions 57 Gt

WEO 2009 450 ppm case ETP2010 ana-lysis

SOURCE: Thomas Kerr, IEA. Based on World Energy Outlook 2009 and Energy Technologies Perspectives 2010 reports.

IEA CLIMATE MITIGATION SCENARIOS

EFFICIENCY = • 45% OF 2030 REDUCTIONS • 58% OF 2050 REDUCTIONS

ENERGY EFFICIENCY“I think we have to have a strong push toward energy efficiency. We know that's the low-hanging fruit, we can save as much as 30 percent of our current energy usage without changing our quality of life.”

(June 28, 2009)http://www.nytimes.com/2009/06/29/us/politics/29climate-text.html

ENERGY EFFICIENCY

MOSTLY BELOW COST EFFICIENCY

MCKINSEY AND CO. “PATHWAYS TO A LOW-CARBON ECONOMY”

ASSUMPTION: LINEAR & DIRECT

ENERGY EFFICIENCY

ENERGY USEX%X%

REALITY: COMPLEX & INDIRECT

ENERGY EFFICIENCY ?%X% ENERGY

USE

CONSIDER ANOTHER INPUT: LABOR

ENERGY EFFICIENCY

LABORUSEX% X%LABOR

EFFICIENCYPRODUCTIVITYENERGY USE

REBOUND EFFECTS

ENERGY EFFICIENCY

ENERGY USEX%X%

CONCLUSION“Rebound effects are real and significant, and combine to drive a total, economy-wide rebound in energy demand with the potential to erode much (and in some cases all) of the reductions in energy consumption expected to arise from below-cost efficiency improvements.”

(p 4)

WHAT ARE REBOUND EFFECTS AND

HOW DO THEY WORK?

REBOUND EFFECTS: THE BASICS

BELOW COST

MCKINSEY AND CO. “PATHWAYS TO A LOW-CARBON ECONOMY”

REBOUND EFFECTS: THE BASICS

ENERGY EFFICIENCY

COST OF ENERGY SERVICES

REBOUND: DIRECT EFFECTS

DEMAND(INCOME/OUTPUT EFFECT)COST OF

ENERGY SERVICES

SUBSTITUTION

REBOUND: DIRECT EFFECTSMACROECONOMIC SCALE: SERIES OF CHAIN REACTIONS

REBOUND: INDIRECT EFFECTS

NET ENERGYCOSTS

ENERGYUSE

RE-SPENDING

REBOUND: INDIRECT EFFECTS

ENERGYUSE

ENERGY EFFICIENCY

EMBODIED ENERGY

REBOUND: MACRO EFFECTS

ENERGYPRODUCT-IVITY

ENERGYUSE

ECONOMIC GROWTH

REBOUND: INDIRECT EFFECTS

ENERGYUSE

ENERGYUSE

MARKET PRICE FOR FUELS

SO HOW BIG IS REBOUND?

REBOUND: DIRECT EFFECTSROUGHLY 10-30% FOR CONSUMERS

IN RICH NATIONS

REBOUND: DIRECT EFFECTSMUCH LARGER IN DEVELOPING NATIONS

(40-80%?)

REBOUND: DIRECT EFFECTSTYPICAL VALUES FOR INDUSTRY MAY BE 20-70%

REBOUND: DIRECT EFFECTSTYPICAL VALUES FOR INDUSTRY MAY BE 20-70%

REBOUND: INDIRECT EFFECTS

RE-SPENDING

EMBODIED ENERGY

GENERALLY SMALL TO MODERATE (0-35%)

REBOUND: MACRO EFFECTS

GROWTHEFFECTS

GENERALLY SMALL TO MODERATE (<15%);MAY BE LARGE WITH MULTI-FACTOR

PRODUCTIVITY GAINS

REBOUND: MACRO EFFECTS

MARKET PRICEEFFECTS

MODERATED BY OTHER REBOUND EFFECTS AND USUALLY < 100%,

BUT CAN BE LARGE OVER TIME IF NET ENERGY DEMAND FALLS SIGNIFICANTLY

SCALE OF TOTAL, ECONOMY-WIDE REBOUND?

MORE ON P. 34OF REPORT

SCALE OF TOTAL, ECONOMY-WIDE REBOUND?

“At the global scope most relevant to climate change and energy resource depletion concerns … perhaps the most robust picture of global economy-wide rebound to date … projects that global efforts to capture ‘no-regrets,’ below-cost energy savings opportunities will trigger rebound effects that collectively erode more than half (52%) of projected energy savings potential….

(p. 50).

EVEN THAT IS LIKELY TO BE AN UNDER-ESTIMATE…• COMPLICATING FACTORS INCREASE BACKFIRE

RISKo BACKFIRE = REBOUND > 100%o BACKFIRE MEANS EFFICIENCY INCREASES NET

ENERGY USE, NOT DECREASES.

SCALE OF TOTAL, ECONOMY-WIDE REBOUND?

“Improved energy efficiency, especially end-use efficiency, often delivers better services. Efficient houses are more comfortable; efficient lighting systems can look better and help you see better; efficiency motors can be more quiet, reliable, and controllable; efficient refrigerators can keep food fresher for longer; efficient cleanrooms can improve the yield, flexibility, throughput, and setup time of microchip fabrication plants; ... retail sales pressure can rise 40% in well-daylit stores ... Such side- benefits can be one or even two orders of magnitude more valuable than the energy directly saved. ...[I]n efficient buildings, ... labor productivity typically rises by about 6-16%. Since office workers in industrialized countries cost ~100x more than office energy, a 1% increase in labor productivity has the same bottom-line effect as eliminating the energy bill – and the actual gain in labor productivity is ~6-16x bigger than that.”

(Amory Lovins, 2005)

BACKFIRE RISK: MULTI-FACTOR PRODUCTIVITY GAINS

BACKFIRE RISK: FRONTIER EFFECTS

WHERE DOES THIS LEAVE US?

• REBOUND EFFECTS ARE REAL, SIGNIFICANT, AND CAN NO LONGER BE IGNORED.

• COMBINE TO ERODE MUCH – AND IN SOME CASES ALL – OF PROJECTED ENERGY SAVINGS FROM BELOW-COST EFFICIENCY MEASURES.

WHERE DOES THIS LEAVE US?

• EFFICIENCY IS STILL GOOD ECONOMIC POLICY, AND PLENTY OF REASONS TO CONTINUE TO PURSUE TRULY COSY-EFFECTIVE EFFICIENCY

• BUT CONVENTIONAL CLIMATE MITIGATION STRATEGIES (WHICH IGNORE REBOUND) ARE DANGEROUSLY OVERRELIANT ON EFFICIENCY

WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY?

Global energy use (quadrillion Btu) and Gross World Product (constant US dollars (billions) 1995), from 1980 to 2000. (Source: World Bank, 2002). http://www.eoearth.org/article/Energy_and_sustainable_development_at_global_environmental_summits

WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY?

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

HISTORIC ANNUAL RATES OF CHANGE IN…

GDP+3%

E/GDP-1%

WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY?

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

HISTORIC ANNUAL RATES OF CHANGE IN…

GDP+3%

E/GDP-3%

>3X INCREASE

WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY?

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

HISTORIC ANNUAL RATES OF CHANGE IN…

GDP+3%

E/GDP-1%

IF…•2/3 DUE TO SECTORAL•1/3 DUE TO TECHNICAL EFFICIENCY

WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY?

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

HISTORIC ANNUAL RATES OF CHANGE IN…

GDP+3%

E/GDP-3%

>7X INCREASE

Assuming NO rebound!

IS ENERGY EFFICIENCY REALLY GOING TO BE THE EASY, LOW-COST, LOW-

HANGING FRUIT STRATEGY FOR CLIMATE MITIGATION?

CONTACT INFO: JESSE JENKINS, DIRECTOR OF ENERGY AND CLIMATE POLICY510-550-8800 X329 – JESSE@THEBREAKTHROUGH.ORG

TED NORDHAUS, CHAIRMAN510-550-8800 X305 – TED@THEBREAKTHROUGH.ORG

MICHAEL SHELLENBERGER, PRESIDENT510-550-8800 X352 – MICHAEL@THEBREAKTHROUGH.ORG