2. ENERGY EFFICIENCY EFFICIENCY = 45% OF 2030 REDUCTIONS 45% OF 2030 REDUCTIONS 58% OF 2050 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/29cli mate-text.html

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

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

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

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

8. REBOUND EFFECTS ENERGY EFFICIENCY ENERGY USE 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 BELOW COST MCKINSEY AND CO. “PATHWAYS TO A LOW-CARBON ECONOMY”

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

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 NET ENERGY COSTS ENERGY USE RE-SPENDING

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

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

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

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 EMBODIED ENERGY GENERALLY SMALL TO MODERATE (0-35%)

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

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

28. SCALE OF TOTAL, ECONOMY-WIDE REBOUND? MORE ON P. 34 OF 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. EVEN THAT IS LIKELY TO BE AN UNDER-ESTIMATE… COMPLICATING FACTORS INCREASE BACKFIRE RISK o BACKFIRE = REBOUND > 100% o BACKFIRE MEANS EFFICIENCY INCREASES NET ENERGY USE, NOT DECREASES. SCALE OF TOTAL, ECONOMY-WIDE REBOUND?

31. “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) BACKFIRE RISK: MULTI-FACTOR PRODUCTIVITY GAINS

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? GDP +3% E/GDP -3% >3X INCREASE

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

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

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 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