Energy and Power En gi neering, 2011, 3, 355-360
doi:10.4236/epe.2011.33045 Published Online July 2011 (http://www.SciRP.org/journal/epe)
Energy Efficiency and Rebound Effect: Does Energy
Efficiency Save Energy?
Abdulkadir Buluş1, Nurgün Topalli2
1Faculty of Economics and Administrative Science, Selçuk University, Konya, Turkey
2Faculty of Economics and Administrative Science, Bozok University, Y o zgat, Turkey
Received February 9, 2011; revised March 18, 2011; accepted April 5, 2011
Abstract
The aim of this study is to examine the theoric and empirical literature about “rebound effect”. This study
summarizes energy efficiency policy and programs in general and in Turkey. Also it gives defination of the
“rebound effect” concept. The rebound effect is related to consumer’s tendency to consume more energy due
to economic benefit from efficiency improvement. The “rebound effect” is the focus of a long-running
dispute of energy economics but it is very new concept in the most developing countries. In literature
according to some economist gains in energy efficiency will also reduce the real per unit price of energy
services and hence the consumption of energy will rise and partially offset the initial reduction in the usage
of energy sources. However for others size of the rebound effect is too small to take attention. The empirical
literature shows that the size of rebound effect can change from country to country and sector to sector.
Keywords: Energy, Energy Efficiency, Rebound Effect, Energy Economics
1. Introduction
The energy issue has been crucially important for state
economies, and (surely) it will sustain its importance in
the future. Besides being a basic input for economies,
energy is the determinant for the world economy in the
fields of economical, social and geographical environ-
ment. Acquiring sufficient energy economically, safely
and cleanly in a determined time is an important sign for
countries to show their levels of development. The
shocks experienced in energy prices in 1970s and the real
wage fluctuations profoundly influenced state economies
in some ways. One of these influences has been observed
in using new technologies in order to minimize the en-
ergy input used in production process. The relation be-
tween energy efficiency and energy consumption has
been a matter of several discussions among developed
countries since 1980s. Brookes (1979), Khazzoom (1980),
Saunders (1984, 1992), Schurr (1982) assert that; while
the increases in energy efficiency at micro level causes
decrease in energy consumption at micro level, it will
cause an increase in energy consumption at national or
macro levels [1-5]. This approach is named as Khaz-
zoom-Brookes postulate. This thesis was first used
(proved) by Harry Saunders in 1992. The studies related
to this field were considerably influenced by the Jevons’
study named “The Coal Question” [6].
Our study consists of three parts. In the first part, en-
ergy efficiency and policy is discussed. Second part
comprises the definitons of rebound effect and related
literature. Consequently, in the final part different poli-
cies are introduced that comprise the energy issues.
2. Energy Efficiency
Energy efficiency is closely related to the energy safety.
Reducing the energy intensity at ultimate consumption,
transmission and distribution losses, and employing
technologies which increase productivity are among the
efficiency increasing links of energy chain. The energy
efficiency and increasing its efficiency have a significant
effect on the solution of some issues such as high exter-
nal dependency rate, energy safety, unemployment,
leading in technology and climate change [7,8]. In the
Energy Efficiency Issue numbered 5627, Energy effi-
ciency is defined as “diminishing energy consuption
without causing a decrease in life standarts and service
quality in domiciles and a decrease in productio n quality
and amount in industries” [9]. Today, the main aim of
the energy efficiency policies is not only the matter of in-

A. BULUŞ ET AL. 356
creasing the energy consumption per capita. It is the aim
of setting up a system which enables maximum energy
generation, distribution and consumption with using
minimum energy instead. These policies comprise sev-
eral steps such as, house designing, standardizing the
electrical appliances used at home and in industry, im-
proving consumer awareness, and tax and incentive pro-
grams [10].
2.1. Energy Efficiency Policy and Programs
Energy efficiency has some positive benefits for states,
energy consumers and enviroment around the world. By
using energy efficiency programs countries can protect
their natural resource’s and environment, reduce de-
pendence on fossil fuels and increase energy security
[11]. Last two decades goverments perform end-use en-
ergy efficiency facility besides supply-side facility. End-
use efficiency implication policy and programs are de-
mand-side management, energy conservation centers,
standarts and labeling, commercial building codes, spe-
cial funds, credit lines and loan guarantee programs,
market transformations, information programs, reporting
and benchmarking [11-13]. Also governments use vari-
ous policy tools to improve energy efficiency. Some of
them are energy and carbon taxes, investment subsides
and public incentives, emission trades, voluntary agree-
ments, R & D subsides [14].
Though energy efficiency has many economic and en-
vironment gains, there are some barriers in efficiency
investments and in the markets. Energy efficiency barri-
ers are summarized as technical barriers, economic bar-
riers, information barriers, host-rental barriers [14] lack
of access to information, limited access to capital, lack of
responsibility, lack of rational decision-making inappro-
priate price signals, lack of access to and trust in effi-
ciency equipment [15]. Governments can implicate more
than one programs at the same time to achieve energy
efficiency goals.
2.2. Energy Efficiency Policies in Turkey
In Turkey, Energy Efficiency Law and the Regulation on
Increasing Efficiency in the use of Energy Sources and
Energy came into force in 2007 and 2008 to reduce ex-
ternal dependency, use energy effectively, prevent wast-
age, reduce energy costs and to protect the environ ment.
Circular No. 2008/2 dated 15/02/2008 from the Office of
the Prime Minister defined measures for the effective
and efficient use of energy within public bodies and in-
stitutions. In 2008, “National Energy Efficiency Move-
ment” started and year 2008 was announced as the “En-
ergy Efficiency Year” [16]. The Energy Efficiency Law
No. 5627, which was accepted in 2007, was to use en-
ergy effectively, prevent wastage, relieve the burden of
energy costs on economy and to increase efficiency in
the use of energy sources and energy itself to protect the
environment [9]. Among the measures that are taken by
the Ministry of Energy and National Sources, priority is
given to the replacement of incandescent bulbs used for
lighting purposes with compact fluorescent lamps which
are up to 5 times more energy-efficient. Another imple-
mentation to increase energy efficiency is to start “E1
Ele ENVER” movement as a step of “National Energy
Efficiency Movement”. In this context, at primary
schools, awareness-raising activities about energy effi-
ciency were carried and dispensing of energy-efficient
lamps started [16].
3. The Concept of Rebound Effect
Rebound effect is a long-term discussed issue on energy
economy. Main discussion topic is whether reductions in
energy consumption as a result of technical efficiency
improvements in the use of energy can be calculated by
simple engineering calculations or not. For example, are
the improvements provided a 20% thermal efficiency in
the heating system going to lead to a 20% reduction also
in aggregate energy consumption. According to eco-
nomic theory, this will not happen. Because these energy
savings can be offset by various mechanisms [17,18].
Rebound effect was first observed in 1965 by Stanley
Jevons. Jevons observed that the new efficient steam
engine reduced the coal consumption and this reduction
in consumption lowered the prices of coal. This means
not only providing more people access to coal, but also
coal becomes more economically for new uses and coal
consumption rises in large amounts [19]. Rebound effect
is associated with consumers’ tend to consume more
energy due to economic gains of efficiency improve-
ments. For example, when the fuel cost per kilometer
falls with fuel-efficient car, the distance can be made
more per kilometer with gas. In general, price reductions
will cause the rise in consumption. Expected energy
saving can be lost because of people’s tend to increase
consumption of energy services due to falling prices.
This missing part is expressed as the rebound effect [20].
At the micro level, the main question is whether tech-
nical efficiency improvements in energy use for reducing
consumption can be estimated by simple engineering
calculations. For example, is 20% improvement in the
fuel efficiency of passenger cars going to reduce en-
gine-fuel consumption by 20% in the use of personal cars.
According to economic theory, this result can not be ob-
tained. Because, energy efficiency improvements lower
marginal cost of energy services and can lead to a rise in

A. BULUŞ ET AL. 357
particular energy services, there are other factors that are
in the direction to be lower than the expected value ob-
tained from simple calculations of economy-wide reduce-
tion in energy consumption. For example, money savings
provided from engine fuel consumption may lead to
other goods and services which have energy require-
ments. This effect is called indirect rebound effect. It will
be useful to classify the indirect rebound effect as “proc-
ess (embodied) energy” and “secondary effect (second-
dary)”. The aggregate of direct and indirect rebound ef-
fect is defined as economy-wide rebound effect. The
classification of rebound effect is given in Table 1 [18].
the consumption of travel and energy services. For ex-
ample, when the cost of driving per mile is cheaper,
consumers can choose to drive more and drive longer
distances. A rise in the consumption of these energy ser-
vices can offset the expected reduction in energy con-
sumption or savings obtained from fuel efficient cars can
be turned to other energy intensive goods and services
such as overseas flights by drivers. Similarly, any reduce-
tion in the energy demand will turn into lower energy
prices and this will be able to stimulate the increase of
energy consumption [18]. Energy efficiency will result in
higher energy consumption; this case was named by
Harry Saunders (1992) as “Khazzom-Brookes Postulate”.
Because this question was firstly discussed by Len
Brookes (1979) and Daniel Khazzoom (1980). Accord-
ing to Khazzoom (1980), with regard to household tools,
under the assumption of a positive demand elasticity of
demand “a decrease occurs in the effective prices of
goods, the demand does not remain constant as a result
of lower effective prices and tends to increase” [1].
3.2. Measuring the Rebound Effect
A part of debates about the size of rebound effect is due
to the lack of clear definitions for rebound effect. Energy
efficiency can be measured in different ways like physic-
cal indicators or economic indicators (energy per output
unit). Energy efficiency can be measured at different
levels in individual production process, in a factory, in a
company, in a sector, even in economy in general. For
this reason, rebound effect is dependent on the selected
indicators and levels [18]. Rebound effect can be ex-
pressed with a simple equation as follows [22]:
3.1. Classification of Rebound Effect
Rebound effect most simply consists of direct, indirect
and economy-wide effects and is measured as a differ-
ence between planned and actual savings because of the
efficiency improvements [19]. Rebound Effect100%
Calculated Savings (kWh)Actual Savings (kWh)
Calculated Savings (kWh)


(1)
3.1.1. Direct Rebound Effect
Direct rebound effect is associated with individual en-
ergy services such as heating, lighting and cooling. The
provision of these services requires the provision of en-
ergy. The development of energy efficiency in a certain
energy service will reduce the price of that service and
may lead to an increase in the consumption of service.
Therefore, the decrease, expected to become as a result
of efficiency improvements, in energy consumption will
be balanced. For consumers, direct rebound effect can be
divided into two as the substitution and income elasticity.
For producers, direct rebound effect can be classified as
the substitution and output effect [19,21].
As partial, while 0 rebound effect means a complete
success for reducing energy use targets, 100% rebound
effect means a complete failure [20]. It is possible to
collect the methods used to obtain the rebound effect in
five groups. The first two methods are related with direct
rebound effect. Other methods are related with economy
wide rebound effect. These methods are evaluation stud-
ies, econometric studies, substitution elasticity studies,
computable general equilibrium models, energy, effi-
ciency and economic growth studies.
3.3. Applied Literature Related to the Rebound
Effect
3.1.2. Indirect Rebound Effect
In an economy, even if direct rebound effect is zero in According to some researchers (Lovins et al., 1998;
Table 1. The classification of rebound effect.
Actual energy savings
Substitution effect
Direct rebound effect
Income/output effect
Embodied energy
“Engineering”
Estimates of energy savings Economy-wide rebound effect
Indirect rebound effect
Secondary effect

A. BULUŞ ET AL. 358
Shipper and Grubb, 2000), the importance of rebound
effect in energy services is small because the demand for
such services is inelastic in many examples and energy
has a smaller share in the total cost of these services.
Another group (Brookes, 2000; Herring, 2006) indicates
that rebound effect is important enough to balance the
energy savings provided from energy efficiency im-
provements [18]. In Lovin (1998), it is suggested that
“rebound” or “takeback” effect is at the low level in en-
ergy efficiency gains by consumers. But for Khazzoom,
Lovin’s analysis is wrong as he does not take into ac-
count in his analysis the macroeconomic responses of
changes in energy prices which are caused by improve-
ments in energy efficiency [6]. As a result of evaluation
studies related to U.S. infrastructure, Nadel (1993) found
that direct rebound effect is 10% or less in lighting sys-
tems, it is zero for heating water and meaningless for
cooling systems. Also, according to the evaluation stud-
ies, standard engineering models estimate the energy
savings in energy efficiency improvements more than
twice in home heating systems. As a result of study it is
found that direct rebound effect is less than 30% in heat-
ing services [18].
According to Gottron (2009), this phenomenon oc-
cured only in very special examples, in some developing
countries, in coal markets of mid-1800s or in electricity
markets of early 1900s. Generally, real rebound effect is
accepted to be limited in mature markets. Actual rebound
effect depends on various variables such as significant
resources, significant regulations, how supply market
improves and the general state of the economy. Actual
rebound effect measurements were found between 0 and
40% for ultimate power tools. For example, a measurable
rebound effect was not found in activity rises in domestic
appliances (white goods). However, the rebound effect
encountered in area heatings and cooling units ranges
from 0% to 50%. At the same time, rising rebound effect
in automobile fuel economy has been the subject of
many studies. The rebound effect in this sector was
found to range generally between 10% and 30% [19].
Sorrell (2007), it was found that in OECD countries,
direct rebound effect is less than 30% in individual home
heating, home cooling and personal automobile trans-
portation, but for transportation rebound effect is nearly
10%. Direct rebound effect is expected to fall in the fu-
ture due to satisfication experienced in demand for these
energy services. In studies based on econometric studies,
it was found that in developed countries, direct rebound
effect is strong in automobile, transportation and home
heating systems, but it is weaker for other consumer en-
ergy services. While theoretical discussions indicate that
direct rebound effect will be higher in developing coun-
tries than developed countries, in practice energy effi-
ciency improvements in developing countries are weak
in certain ways [18].
In Schipper and Grubb (2000), rebound effect was
tried to be determined by taking energy use, energy effi-
ciency and price variables in different sectors in IEA
countries into acount. The date of 1970 was choosen as
the beginning period of the study. It was identified that
basic measurements in activities (car use, output of
manufacturing industry, structure, home field, etc.) in the
period under review show a little change to the changes
in energy prices and efficiency. Also, in the study, indi-
rect effects were found to be very small in the periods of
1970 and 1980 [23]. In Grepperud ve Rasmussen (2004),
rebound effect for Norway economy was investigated by
using general equilibrium model. Energy efficiency im-
provements experienced in the electricity and oil in 6
different sectors were examined in the study. As a result
of study, different and meaningful findings were ob-
tained between sectors both in energy use and in the
formation of greenhouse gases. It was found that, there is
a meaningful rebound effect in manufacturing sector,
electricity consumption will increase by 87.5% and elec-
tricity consumption will increase 17.5%. In other sectors,
rebound effect is very weak or absent [24].
In Bentzen (2004), potential rebound effect in manu-
facturing industry was tried to be estimated by using time
series data of US 1949-1999 period. Dynamic OLS
method was used in the study. In the context of asym-
metric price effects that the model enables, rebound ef-
fect was found to be nearly 24% for US manufacturing
sector. When compared with other empirical studies
which applied to firms, this result was found to be high.
The reason for this is, structural changes that affect en-
ergy consumption and aggregated data used are probably
effective. Therefore, it is stated that rebound effect can
be lower than 24% of its actual value [25]. In Berkhout
et al. (2000), price elacticities obtained by empirical es-
timates were used for Holland as indication of rebound
effect and as a result, this effect was found to be between
0 and 30%. These results show that an important energy
saving potential is obtained from new technologies. But
for consumers, saving potential remains neutral-ineffec-
tive in some levels due to increasing demand for energy
services [26].
4. Conclusions
In 1980s, some views were put forward in the literature
that energy efficient studies will not reduce the energy
consumption, even they will increase it. The concept that
increases in savings provided with energy efficient prac-
tises will be balanced with the increases in energy con-
sumption is called as rebound effect. Many governments

A. BULUŞ ET AL.359
search ways for improving energy efficiency in the
economy to reduce the dependency on fosil fuels like oil,
natural gas, coal and to reach the target of reducing car-
bon emissions with environmentally friendly practices.
Some mechanism that get together usually under the re-
bound effect can reduce the size of targets in “energy
savings”. There are some evidences showing distinct
types of energy efficient technologies caused an increase
in energy demand in the past. This case was seen in the
nineteenth century especially in new technologies like
steam engine. There are few studies about the improve-
ments in energy efficiency in developing countries. Re-
bound effect will probably be higher in developing coun-
tries. Because, the demand for energy services in these
countries is far from sauration and this case is supported
by a limited number of empirical studies. Both direct and
indirect rebound effect can emerge with quite different
results between different technologies, sectors and in-
come groups.
Recently studies are focused on the impact of rebound
effect on fossil markets as gasoline markets and global
climate change. Energy efficiency can be encouraged
with policies such as increasing energy prices, carbon
taxes and building regulations. Each of these policies has
an important role on energy and climate policies. But,
some applications related with these policies can increase
energy consumption and non-price policies for reducing
carbon emissions. In some circumstances, for example in
the presence of energy-efficient technologies that im-
prove significantly the efficiency of energy-intensive
industries, rebound effect can go beyond 50% in econ-
omy in general and it can increase the energy consump-
tion in the long term. This put forth the need for re-
evaluating the potential energy efficiency policies. In
sectors that rebound effect is expected to be high, there
may be need for energy policies which will increase en-
ergy prices. Policy makers will be able to obtain real
achievements from planned efficiency policies by calcu-
lating the rebound effect and they will be able to revise
their programs by taking the possible rebound effect into
account. Losses in energy savings due to rebound effect
are closely related to losses in consumers’ quality of life.
Therefore, rebound effect is an issue which must be con-
sidered.
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