Calculation of the indirect or second order effects of environmental policies
In this project, we assessed how 'rebound effects’ play at the Flemish level. First by outlining the concept of 'rebound effect' in a reasoned and structured manner; and by providing some examples. Second, we illustrated the rebound effect for Flanders by using two cases: one on transport and one on energy.
An example is the easiest way to explain the ‘rebound effect’. Assume that the use of additional insulation in a house, ceteris paribus, leads to an energy saving of 20%. If the actual saving is smaller or larger than 20%, we refer to it as a rebound effect. The gain in efficiency leads to a saving, which in turn leads to a change in behaviour – usually an increase in consumption.
The rebound effects or changes in behaviour play directly – via the additional consumption of energy or other environmental goods, as well as indirectly – via the consumption of other goods. The consumption of other goods in turn also leads to additional use of energy- or environmental goods. In addition, we must also consider economy-wide effects. These are especially important for producers as they generate intermediary goods for other producers. A price decrease for an intermediate product is translated into a large number of other final (or intermediate) products. In this way the initial price decrease finds its way through the economy leading to an increase in energy use and/or environmental pressure, or, 'rebound effect'.
From a classical economic point of view the existence of a rebound effect is not necessarily negative. A gain in efficiency permits the consumer to save money. This saving allows the consumer to purchase more energy and other goods – leading to increased welfare. The economic growth also benefits from this efficiency gain. This does not mean that one may ignore the rebound effect. When making forecasts for the achievement of certain goals with respect to objectives related to energy or environment, it is important to consider the rebound effect. Otherwise, it might be hard to reach the objectives set.
The case studies investigated by TML confirm the role of rebound effects in Flanders:
- Telecommuting leads to energy savings with respect to commuting, but those savings may be offset entirely by the higher energy consumption at home and by the fact that telecommuting leads to additional trips.
- An efficiency improvement in the petrochemical industry leads to higher energy use in Flanders.
- An efficiency improvement in the services reduces energy use in Flanders as a whole. This decrease in energy use is higher than the energy increase in the service sector.
Final report (in Dutch)
Vlaamse overheid, Departement Leefmilieu, Natuur en Energie, Afdeling Milieu-, Natuur- en Energiebeleid (Flemish government)
Stef Proost (KU Leuven), Sandra Rousseau (KU Leuven en HUB)
Eef Delhaye, Christophe Heyndrickx, Rodric Frederix
+32 16 74.51.22