The Economic Effects of Energy Efficiency

This thesis investigates how the economic effects of energy efficiency, the conceptual distinction between weak and strong sustainability, rebound effects and their relations to sustainable energy are used in energy policy. According to the Dutch sustainable energy policy, energy efficiency is beneficial to sustainability as it reduces the amount of energy resources needed to produce a similar amount of energy services. In this view, energy efficiency saves energy resources and cuts back CO2-emissions. For sustainability we should save some resources for future generations, and this suggests using resources as efficiently as possible. When energy efficiency improvements equal cost reductions, they provide an option space for savings and investments. If the energy efficiency stimuli actually lead to energy resources being saved this is compatible with ‘strong sustainability’. Yet, if the rents are invested in more energy consuming activities, this is not compatible with strong sustainability, but can still be compatible with ‘weak sustainability’. The case in which the rents of energy efficiency improvements lead to the use of more energy resources is generically called: rebound effects. These effects provide a problem for the popular idea of energy efficiency adding to the aims of sustainability. They show that the economic effects of energy efficiency can be counter-productive for actually achieving the aims of weak or strong sustainability, which contradicts the outcome as suggested by sustainable energy policies; because they are based on calculations without accounting for rebound effects. Energy efficiency and sustainability go hand in hand, at least, so it seems. Yet, when taking a closer look at debates about energy efficiency, I find that the relationship with sustainability is not as straightforward as suggested in the Dutch sustainable energy policy. My thesis is that if, in the context of the Dutch sustainable energy policy, energy efficiency is assumed to lead to economic and environmental benefits by reducing the amount of natural capital needed for input to produce the same amount of output, than energy efficiency is ‘sustainable’ in a weaker or stronger sense. But, when energy efficiency leads to rebound effects, thereby increasing the use of natural capital, it is only ‘sustainable’ in a weak sense. Even more, when rebound effects result in an increased level of natural capital use compared to the situation without an energy efficiency improvement, than energy efficiency is not ‘sustainable’ in any sense. In the latter case, energy efficiency is not ‘sustainable’ in any of the two senses. The possibility of energy efficiency not being ‘sustainable’ is overlooked in the Dutch sustainable energy policy, which is rather naïve considering the underlying economic effects.