Re-spending rebound: A macro-level assessment for OECD countries and emerging economies

It is well-known that energy conservation can lead to rebound effects that partly offset the original energy savings. One particular rebound mechanism is re-spending of money savings associated with energy savings on energy intensive goods or services. We calculate the average magnitude of this “re-spending rebound” for different fuels and countries, and for both energy and carbon (CO2) emissions. We find that emerging economies, neglected in past studies, typically have larger rebounds than OECD countries. Since such economies play an increasingly important role in the global economy the re-spending rebound is a growing concern. The re-spending effect is generally larger for gasoline than for natural gas and electricity. Paradoxically, stronger financial incentives to conserve energy tend to increase the rebound. This suggests that with climate regulation and peak oil the re-spending rebound may become more important. We discuss the policy implications of our findings.