Energy efficiency and household behavior: The rebound effect in the residential sector

Over the years, various efficiency policies have been designed and implemented to reduce residential energy consumption. However, it is very common that the policy expectations that are based upon engineering calculations do not come true. The widely accepted explanation for the gap between expectation and the realization is the change of household behavior, as the energy efficiency gains change the perceived cost of energy services and thereby generate shifts in consumption patterns – the rebound effect. The real controversy about the rebound effect lies in the identification of its magnitude. In this paper, we estimate the rebound effect in residential energy consumption by comparing the actual gas consumption levels with the ex-ante predictions within a sample of well over 600,000 Dutch dwellings and households. We find a significant deviation between the engineering predictions and the households’ actual energy consumption, a difference which varies by ownership, wealth, income and the actual gas use intensity. Our results show a rebound effect of 26.7 percent among home-owners, and 41.3 percent among tenants. Moreover, we find that these effects are greatest among the lower income-wealth groups, and among households that tend to use more gas than average.