Rebound Effect: New Tech, Old And Stupid Humans

The rebound effect is the reduction in expected gain from new technologies that increase efficiency, because of changes in behavior or systemic responses. These responses diminish the benefits of the measures taken. Thus the improvements in efficiency zero out. A classic example is a driver who buys a vehicle that is more fuel-efficient. How do they reap the benefits of lower operating expenses? They drive around more frequently. Similarly, improvements in technological efficiency have just spiked consumption. The effect is present in labor. Even though we are more productive and “need” to work less than ever before, we work longer hours.

You can calculate the rebound effect as a mathematical value. If a car is 10 percent more fuel-efficient, but only a 4 percent drop in fuel consumption ensues, there is a 60 percent rebound effect. The other 6 percent probably disappeared due to driving faster or longer than before. Sometimes the rebound effect exceeds 100 percent. That is, the actual resource savings are negative because usage increases beyond them. This is known as Jevons paradox. An example was England’s consumption of coal after James Watt introduced the steam engine. Despite the more cost-effective power source, total coal consumption increased, even as the amount of coal required for any operation fell.

The same effect is present in countless efficiency calculations across the economy. Fuel-efficient cars result in an increase of driving speed and distances traveled, negating the benefit. The size of houses grew when home heating technologies became cheaper. When energy-efficient solutions to greenhouse gas emissions are put forward, people just use more energy in general and the climate suffers as much warming as before. After installing energy-efficient lights, people leave them on for longer periods because the cost savings make it cheaper to use them. Money saved on fuel due to more efficient cars is spent on additional goods and services that also require energy to produce. Nobody wins.

Real-world examples of the rebound effect:

• Automobile Fuel Efficiency: cars become more fuel-efficient, reducing the cost per mile of driving. Drivers take more often or longer trips, which reduces the net fuel savings.

• Household Energy Consumption: energy-efficient appliances and lighting lowers electricity bills. Households start using these appliances more frequently or invest the savings in other energy-intensive comforts, negating the benefits.

• Industrial Settings: a factory upgrades to more energy-efficient machinery. Since the operating costs are now lower, production is increased, thereby using more energy overall even though each unit is produced more efficiently.

• Information Technology: computing power and energy-efficient servers lower the cost of running data farms. Companies expand their digital services to store more data, increasing overall consumption despite individual efficiencies.

How you might use the rebound effect as a mental model: (1) calculate the net impact — evaluate not only direct savings but also potential behavioral or economic responses that offset those gains; (2) incorporate human stupidity — consider how consumers or teams change their actions in response to lower costs via surveys, historical data, or simulation models to form predictions; (3) counteract the effect — implement a consumption cap so that efficiency gains translate into actual resource savings, such as by pairing more efficient technology with incentives to save; (4) be mindful — know that investments in efficiency require additional measures to stop it from spiraling into increased overall consumption.