Comparing energy and material efficiency rebound effects: an exploration of scenarios in the GEM-E3 macroeconomic model

Abstract

This paper uses the GEM-E3 macroeconomic computable general equilibrium model to calculate the magnitude of greenhouse gas (GhG) emission rebound effects across a range of efficiency scenarios in the automotive sector supply chain. The scenarios are technically feasible as they are designed using bottom up information from the iron and steel industry. Rebound effects occur when efficiency improvements reduce prices, stimulating demand and offsetting some of the environmental benefits that would otherwise be had. This paper allows energy, material and product-service efficiency rebound effects to be compared for the first time. The results suggest that there is a greater risk of rebound effects for downstream emissions abatement strategies that save embodied emissions: 85% of the emissions savings in the product-service efficiency scenario and 77% of emissions in the material efficiency scenario are offset by economy-wide rebound effects. This compares to 7% in the energy efficiency scenario. These findings show that, in the current policy environment in which GhG emissions remain relative unconstrained, improvements in material efficiency that are particularly good at spurring growth are also likely to carry the greatest rebound effects. The conclusions of this paper are not purely dependent on the chosen macroeconomic model, but are a function of the underlying value structure along supply chains: downstream efficiency improvements that save embodied emissions involve greater potential monetary savings per unit GhG avoided, spurring rebound effects.