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Rebound Effect: Energy Efficiency

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1. Read through the Executive Summary of the UKERC report on the Rebound Effect. Briefly describe the difference between the "direct" rebound effect and the "indirect" rebound effect.
2. Critique the figures and the analysis on pages 11-13 of ExxonMobil's "Outlook for Energy - A View to 2030". Briefly address what is being assumed about how energy efficiency gains will affect energy demand in the future.

The links for the reading is below.
UK Energy Research Centre (UKERC) (2007) The rebound effect: an assessment of the evidence for economy-wide energy savings from improved energy efficiency :
http://www.ukerc.ac.uk/asset/3B43125E-EEBD-4AB3-B06EA914C30F7B3E/

http://www.mtshouston.org/outlook/outlook_2010/exxonmobil_outlook_for_energy.pdf

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This solution explains rebound effect and energy efficiency. The sources used are also included in the solution.

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The direct rebound means consumers increase their use of an efficient appliance because of its lower cost of energy service. In contrast indirect rebound occurs when consumers re-spend energy-cost savings from an efficient appliance on other goods which require embodies energy for their production. The direct rebound effect means an increase in the consumption of that good because of substitution effect. Indirect rebound increases the consumption of the resource through the income effect. According to the UKERK report, engineering improvement make energy services cheaper so consumption of these services increases thereby offsetting some of the energy savings achieved. This is called direct rebound. According to the UKERK if a factory uses energy more efficiently, it becomes more profitable encouraging more investment and higher ...

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