Report on combinations of energy efficiency policies and other energy and climate policy instruments

The ENTRACTE research project is aiming to analyse the European climate policy portfolio with special emphasis on the role of interactions between its different parts. The project’s ultimate goal is to provide pragmatic guidance to policy makers for designing effective, cost efficient and politically and legally feasible climate policy portfolios.

This report is especially concerned with rebound effects. Rebound effects refer to „an increase in the supply of energy services with a corresponding decrease in the effective price. This in turn may result in an increase in demand in response to these price decreases. Therefore, increased demand for the service can erode technological efficiency gains.” The fall in the effective per unit price of energy will lead to additional substitution-, scale-, income-, market- and economy-wide (macroeconomic) effects on energy use that may counteract the initial potential energy savings. Such effects are denoted as direct and indirect rebound effects. The available estimates of rebound effects rely on very different methodologies and focus on different sectors (production vs consumption) and countries, making it hard to derive comprehensive and consistent insights. Furthermore, they often differ in their definition of behavioural and other responses. The approaches in this report include numerical modelling and econometric analyses.

Authors: Brita Bye, Snorre Kverndokk, Elena Verdolini