Rebound Effect (Jevons’ Paradox)

Introduction
A central concept in industrial ecology, the term Jevons‘ Paradox was derived from a passage in W. S. Jevons, The Coal Question, 1865, in which the author analyses improvements in the efficiency of the steam engines over the last decades. The first steam engines powered by coal had very low efficiency, of the order of 5%. They produced a lot of noise and a lot of dissipated heat, and only a little bit of effective work in spinning or weaving machines, or moving the first trains. With time efficiency improved, and Jevons posited that this increased efficiency would not necessarily lead to a decrease in demand for coal by manufacturers and railway companies. On the contrary, increased efficiency in fact led to a decrease in the actual cost of coal per unit of work done. It could lead therefore to an increase in the demand for coal. This was later called the Rebound Effect.

Application
For instance, consider an increase in the efficiency of transport by motor car of 20 percent. This means that a similar car now can travel 20 percent more miles that the previous model, with the same amount of petrol. What will car buyers do? They might decide to travel the same amount of miles as before, saving petrol, or they might decide (depending on the price-elasticity of demand) to travel more miles (or to buy bigger cars), therefore not saving petrol  to the same extent or not saving petrol at all. As another example, assume that you change your electric light bulbs to longer lasting energy saving bulbs. You have paid some initial amount of money to buy the new bulbs but per month you are now spending less KWh and therefore less money, for the same amount of lighting. What are you going to do with the money you are saving? First you pay back the initial investment. Once this is done, it is unlikely that you are going to put more light bulbs around the house. But it is not unlikely that this extra money will now go at least in part to extra tavel or extra consumption, entailing some extra amounts of energy expenditure.

A point of caution
When we see that increased efficiency in the use of energy (or materials) is coupled with increased use, we cannot directly conclude that the Jevons‘ Paradox or the Rebound Effect is at play. It may be that increased efficiency is leading, hopefully, to less use of energy (or materials), but nevetherless this can be nullified by a simultaneous increase in incomes due to economic growth, ultimately resulting in increased use of energy (or materials). Here we must pay attention not to the price-elasticity of demand but to the income-elasticity of demand. In fact, the main cause of the increased social metabolism of the economy is economic growth. It is not Jevons‘ Paradox or the Rebound Effect.