ENERGY EFFICIENCY

2. ENERGY EFFICIENCY • EFFICIENCY = • 45% OF 2030 REDUCTIONS • 58% OF 2050 REDUCTIONS

3. ENERGY EFFICIENCY “I think we have to have a strong push toward energy efficiency. We know that's the low-hanging fruit, we can save as much as 30 percent of our current energy usage without changing our quality of life.” (June 28, 2009) http://www.nytimes.com/2009/06/29/us/politics/29climate-text.html

4. ENERGY EFFICIENCY MCKINSEY AND CO. “PATHWAYS TO A LOW-CARBON ECONOMY” MOSTLY BELOW COST EFFICIENCY

5. ASSUMPTION: LINEAR & DIRECT ENERGY EFFICIENCY ENERGY USE X% X%

6. REALITY: COMPLEX & INDIRECT ENERGY EFFICIENCY ENERGY USE X% ?%

7. CONSIDER ANOTHER INPUT: LABOR LABOR ENERGY EFFICIENCY LABOR USE ENERGY USE X% X% EFFICIENCY PRODUCTIVITY

8. REBOUND EFFECTS ENERGY EFFICIENCY ENERGY USE X% X%

10. CONCLUSION “Rebound effects are real and significant, and combine to drive a total, economy-wide rebound in energy demand with the potential to erode much (and in some cases all) of the reductions in energy consumption expected to arise from below-cost efficiency improvements.” (p 4)

11. WHAT ARE REBOUND EFFECTS AND HOW DO THEY WORK?

12. REBOUND EFFECTS: THE BASICS MCKINSEY AND CO. “PATHWAYS TO A LOW-CARBON ECONOMY” BELOW COST

13. REBOUND EFFECTS: THE BASICS COST OF ENERGY SERVICES ENERGY EFFICIENCY

14. REBOUND: DIRECT EFFECTS DEMAND (INCOME/OUTPUT EFFECT) COST OF ENERGY SERVICES SUBSTITUTION

15. REBOUND: DIRECT EFFECTS MACROECONOMIC SCALE: SERIES OF CHAIN REACTIONS

16. REBOUND: INDIRECT EFFECTS RE-SPENDING NET ENERGY COSTS ENERGY USE

17. REBOUND: INDIRECT EFFECTS EMBODIED ENERGY ENERGY EFFICIENCY ENERGY USE

18. REBOUND: MACRO EFFECTS ECONOMIC GROWTH ENERGY PRODUCT- IVITY ENERGY USE

19. REBOUND: INDIRECT EFFECTS MARKET PRICE FOR FUELS ENERGY USE ENERGY USE

20. SO HOW BIG IS REBOUND?

21. REBOUND: DIRECT EFFECTS ROUGHLY 10-30% FOR CONSUMERS IN RICH NATIONS

22. REBOUND: DIRECT EFFECTS MUCH LARGER IN DEVELOPING NATIONS (40-80%?)

23. REBOUND: DIRECT EFFECTS TYPICAL VALUES FOR INDUSTRY MAY BE 20-70%

24. REBOUND: DIRECT EFFECTS TYPICAL VALUES FOR INDUSTRY MAY BE 20-70%

25. REBOUND: INDIRECT EFFECTS RE-SPENDING GENERALLY SMALL TO MODERATE (0-35%) EMBODIED ENERGY

26. REBOUND: MACRO EFFECTS GENERALLY SMALL TO MODERATE (<15%); MAY BE LARGE WITH MULTI-FACTOR PRODUCTIVITY GAINS GROWTHEFFECTS

27. REBOUND: MACRO EFFECTS MODERATED BY OTHER REBOUND EFFECTS AND USUALLY < 100%, BUT CAN BE LARGE OVER TIME IF NET ENERGY DEMAND FALLS SIGNIFICANTLY MARKET PRICEEFFECTS

28. SCALE OF TOTAL, ECONOMY-WIDE REBOUND? MORE ON P. 34OF REPORT

29. SCALE OF TOTAL, ECONOMY-WIDE REBOUND? “At the global scope most relevant to climate change and energy resource depletion concerns … perhaps the most robust picture of global economy-wide rebound to date … projects that global efforts to capture ‘no-regrets,’ below-cost energy savings opportunities will trigger rebound effects that collectively erode more than half (52%) of projected energy savings potential…. (p. 50).

30. SCALE OF TOTAL, ECONOMY-WIDE REBOUND? EVEN THAT IS LIKELY TO BE AN UNDER-ESTIMATE… • COMPLICATING FACTORS INCREASE BACKFIRE RISK • BACKFIRE = REBOUND > 100% • BACKFIRE MEANS EFFICIENCY INCREASES NET ENERGY USE, NOT DECREASES.

31. BACKFIRE RISK: MULTI-FACTOR PRODUCTIVITY GAINS “Improved energy efficiency, especially end-use efficiency, often delivers better services. Efficient houses are more comfortable; efficient lighting systems can look better and help you see better; efficiency motors can be more quiet, reliable, and controllable; efficient refrigerators can keep food fresher for longer; efficient cleanrooms can improve the yield, flexibility, throughput, and setup time of microchip fabrication plants; ... retail sales pressure can rise 40% in well-daylit stores ... Such side- benefits can be one or even two orders of magnitude more valuable than the energy directly saved. ...[I]n efficient buildings, ... labor productivity typically rises by about 6-16%. Since office workers in industrialized countries cost ~100x more than office energy, a 1% increase in labor productivity has the same bottom-line effect as eliminating the energy bill – and the actual gain in labor productivity is ~6-16x bigger than that.” (Amory Lovins, 2005)

32. BACKFIRE RISK: FRONTIER EFFECTS

33. WHERE DOES THIS LEAVE US? • REBOUND EFFECTS ARE REAL, SIGNIFICANT, AND CAN NO LONGER BE IGNORED. • COMBINE TO ERODE MUCH – AND IN SOME CASES ALL – OF PROJECTED ENERGY SAVINGS FROM BELOW-COST EFFICIENCY MEASURES.

34. WHERE DOES THIS LEAVE US? • EFFICIENCY IS STILL GOOD ECONOMIC POLICY, AND PLENTY OF REASONS TO CONTINUE TO PURSUE TRULY COSY-EFFECTIVE EFFICIENCY • BUT CONVENTIONAL CLIMATE MITIGATION STRATEGIES (WHICH IGNORE REBOUND) ARE DANGEROUSLY OVERRELIANT ON EFFICIENCY

35. WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY? Global energy use (quadrillion Btu) and Gross World Product (constant US dollars (billions) 1995), from 1980 to 2000. (Source: World Bank, 2002). http://www.eoearth.org/article/Energy_and_sustainable_development_at_global_environmental_summits

36. WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY? GDP +3% E/GDP -1%

37. WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY? >3X INCREASE GDP +3% E/GDP -3%

38. WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY? • IF… • 2/3 DUE TO SECTORAL • 1/3 DUE TO TECHNICAL EFFICIENCY GDP +3% E/GDP -1%

39. WHY IS IT SO HARD TO DECOUPLE ECONOMIC GROWTH FROM ENERGY? Assuming NO rebound! >7X INCREASE GDP +3% E/GDP -3%

40. IS ENERGY EFFICIENCY REALLY GOING TO BE THE EASY, LOW-COST, LOW-HANGING FRUIT STRATEGY FOR CLIMATE MITIGATION?

41. CONTACT INFO: JESSE JENKINS, DIRECTOR OF ENERGY AND CLIMATE POLICY 510-550-8800 X329 – JESSE@THEBREAKTHROUGH.ORG TED NORDHAUS, CHAIRMAN 510-550-8800 X305 – TED@THEBREAKTHROUGH.ORG MICHAEL SHELLENBERGER, PRESIDENT 510-550-8800 X352 – MICHAEL@THEBREAKTHROUGH.ORG