Estimating the Direct Rebound Effect in the Residential Energy Sector: An Application in Spain - Green Energy and Efficiency: An Economic Perspective - page 164

who keep their heating on for longer after replacing their old heating system by a
more energy ef cient one.

, or second-order response, is the income effect that
arises from an increase in the real income of an individual as a result of the use of a
more ef

The “ indirect rebound effect ”

cient technology. This income may be used for other activities which, of
course, may entail energy consumption, so total energy demand may increase.
Effects on the economy as a whole, or the third order response, involve the
adjustments that take place in markets related to technological change. Thus, an
increase in energy ef

ciency changes production costs and therefore market equi-
librium of all the goods related to the technological improvement.
Greening et al. [ 7 ] argue that there is also a fourth effect, which they call the

“ , which includes all potential changes in human activities

that could potentially increase or decrease energy consumption in the wake of a
technological improvement. They cite changes in the use of time and in the
structure of labour forces as cases in point.
There is a growing body of literature aiming at estimating the direct rebound
effect including, particularly, the paper by Roy [ 13 ], which demonstrates that in
homes which replace kerosene lighting by more ef

transformational effect ”

cient systems based on solar
energy, consumption of kerosene decreases by only between 20 and 50 % of the
amount initially expected. This can be explained in terms of previously unmet
demand for lighting, lower costs paid by individuals who instal more efcient
appliances with the aid of government subsidies and low levels of coordination
between energy-saving policies and energy prices.
The papers by Br nnlund et al. [ 4 ] and Mizobuchi [ 11 ] apply a model called the

Linear Approximate Almost Ideal Demand System. Both these papers calculate the
direct rebound effect as the difference in CO 2 emissions between the situation with
and without the direct rebound effect, i.e. when the expected energy savings are
achieved in full.
The paper by Br

ä

ä nnlund et al. [ 4 ] simulates the effect of a 20 % increase in energy

ef ciency in transport services and lighting on emissions of CO 2 , sulphur dioxide

(SO 2 ) and nitrogen oxides (NOx). The results show an increase in gas emissions of
around 5 % and a rebound effect of more than 12 % after technological improvement.
The authors conclude that an increase of 130 % in the taxes levied on CO 2 emissions
would cancel out those emissions, reduce SO 2 output and increase NOx emissions.
Mizobuchi [ 11 ] highlights the role of capital costs in calculating the direct
rebound effect. The key assumption is that more energy ef

cient appliances have

higher capital costs than less-ef cient ones. The results in the paper show that if

capital costs are ignored the direct rebound effect is 115 %, which implies that an
increase in energy ef ciency actually increases CO 2 emissions. However, the direct

rebound effect drops drastically to 27 % when capital costs are included.
A major review of the literature on the direct rebound effect can be found in the
paper by Sorrell et al. [ 15 ]. In regard to heating, the authors conclude that there
would be a direct rebound effect of 20 %, while for the case of domestic hot water
they mention only the result obtained by Guertin et al. [ 8 ], who estimate a direct
rebound effect of between 34 and 38 %.