Climate treaty: Pricing would limit carbon rebound
This commentary was written as an advice to the negotations for a climate agreement at the COP21 climate summit in Paris (30 November - 13 December 2015). It raised attention for a neglected issue, namely carbon rebound of climate strategies in the absence of an adequate climate treaty. Energy rebound denotes that saving energy through technological improvements or behavioral changes triggers indirect, additional energy use. Various mechanisms contribute to this: e.g., improvements in energy efficiency make associated energy services cheaper which increases their consumption; saving energy means often saving money which is then spent on other energy-using goods or services; and more energy-efficient technologies diffuse easily to new types of uses or sectors.
Unilateral national climate policies are not strict enough to control carbon rebound — a side effect of some energy conservation strategies that undercuts net carbon savings. I suggest that a global agreement on variable carbon pricing at the forthcoming climate summit in Paris would reap considerable rebound-related benefits.
Economy-wide studies indicate that overall carbon rebound is at least 50%, depending on the country (J. Dimitropoulos Energy Policy 35, 6354–6363; 2007). Despite this, the effects of rebound have been largely ignored by the Intergovernmental Panel on Climate Change and at United Nations climate meetings.
Technical standards do not control rebound effectively: they cover only a small subset of products. For example, when the European Union began phasing out incandescent light bulbs in 2009, light-emitting diodes became so widespread that any energy savings were reduced.
The most effective way to discourage rebound is through carbon pricing, a policy that underpins all potential energy saving decisions. Any rebound tendency would elicit a higher carbon price under a cap-and-trade permit scheme. A carbon tax would require frequent adjustment to achieve the same outcome. This would be difficult politically, especially in the form of nationally distinct taxes.