Rebound effect: how much to worry?

• Effectiveness of energy efficiency depends on the magnitude of rebound effect.
• Theoretically the mechanism of rebound is accepted in the literature.
• The magnitude of rebound is debated in the literature.
• The magnitude of rebound varies across sectors and across countries.
• There are limited researches on rebound effect in developing countries.

Actual climate benefit in terms of reduction in fossil fuel use and resultant climate benefit achieved through energy efficiency strategy can be correctly measured only when rebound effect is netted out. Although basic mechanism of rebound is widely accepted, the magnitude of the same is highly debated in the literature. Whole range of possibilities have been found in empirical studies: no rebound to partial and full rebound, backfire as well as superconservation/negative rebound. Such estimates vary across sectors: residential, commercial, transport and industry and across countries. There is limited evidence from developing countries where rebound effect is expected to be higher in the presence of unmet demand.