Missing carbon reductions?

Abstract

Households are expected to play a pivotal role in reducing the UK’s carbon emissions, and the Government is targeting specific household actions as part of its plan to meet the legally binding targets set out in the Climate Change Act 2008. However, by focusing on discrete actions, the Government fails to take account the Rebound Effect – a phenomenon whereby carbon reductions estimated by simple engineering calculations are frequently not realised in practice. For example, installation of loft insulation will most certainly increase the thermal efficiency of homes. But this will free up money that otherwise would be spent by householders on energy bills: this money may then be spent on heating houses to higher temperatures, buying extra furniture, or, say, flying on vacations. Alternatively it may be put into household savings. All of these options give rise to carbon emissions, thus the total carbon saved may be less than predicted. Indeed, in some instances, emissions may even increase – this being known as ‘Backfire’. In this paper we estimate the extent of the Rebound Effect under a range of assumptions concerning consumer purchasing decisions, with varying prices, incomes, and savings levels. The paper concludes with a discussion of the policy implications of our findings and provides guidance on the conditions under which Rebound and Backfire can be minimised.