What happens if we pursue efficiency improvements across an entire sector or economy?

At the economy-wide, macroeconomic scale, the aggregate impacts of widespread energy efficiency improvements can lead to substantial rebound effects. As producers and consumers respond in turn to various cascading changes in the price of goods and services, the pace of economic growth quickens, and market prices for fuels may fall, driving further rebound. A number of ‘Computable General Equilibrium’ (CGE) models generally show rebound at the scale of a national economy at 40 to 60 percent for developed economies, and 50 percent to much greater than 100 percent (‘backfire) for developing economies. These studies look at national economies and thus ignore global, macroeconomic impacts beyond national borders, which can add additional rebound in energy consumption. ‘Integrative modeling’ found that if the world adopted all of the “no regrets” energy efficiency policies suggested by the IEA, then rebounds effects would erode more than half of expected savings (52 percent) in the long-term. There are also several reasons to think this is may be a conservative estimate.