The Rebound Effect
While individuals or organizations implement energy efficiency improvements, they commonly save money as well as energy. Therefore, if the money saved is then spent on higher standards of service, or additional energy-consuming activities then a few or all of the energy savings may be eliminated. This tendency is sometimes called as the rebound effect. For instance, if householders install improved insulation or a more efficient heating boiler, they should within principle decrease their heating bills. Therefore, if they instead maintain their homes at a higher temperature than before, or heat they for longer periods and the savings might be wholly or partly negated. Instead, they may decide to spend the money saved through lower heating bills through taking a holiday involving air travel. Their energy savings will be offset through increased consumption, although of a different type since air travel is quite energy intensive.
These examples underscore the significance of user awareness and education. This aspect is commonly neglected although propagating the strengths of energy appliances. Sustained campaigns are required to popularize the best use energy saving practices. In devising national policies to encourage energy efficiency improvement, Governments required to take the rebound effect into consideration. Another policy implication is which citizens should be given incentives to spend any savings they make by implementing energy efficiency measures in ways which are energy-frugal rather than energy intensive.