Energy efficiency—a critical view

This paper challenges the view that improving the efficiency of energy use will lead to a reduction in national energy consumption, and hence is an effective policy for reducing national CO2 emissions. It argues that improving energy efficiency lowers the implicit price of energy and hence make its use more affordable, thus leading to greater use—an effect termed the ‘rebound’ or ‘takeback’ effect. The paper presents the views of economists, as well as green critics of ‘the gospel of efficiency’. The paper argues that a more effective CO2 policy is to concentrate on shifting to non-fossil fuels, like renewables, subsidized through a carbon tax. Ultimately what is needed, to limit energy consumption, is energy sufficiency (or conservation) rather than energy efficiency.