Abstract:
Increased efficiency of household energy-using appliances effectively lowers the price of the services these devices provide. Basic consumer theory predicts that ceteris paribus, these lower prices will increase usage, thus making the effect on total energy demand ambiguous. In the literature, this phenomenon
has been called the rebound effect. In this paper, I attempt to estimate the rebound effect for home heating using cross-sectional data provided by the U.S. Department of Energy's 2005 Residential Energy Consumption Survey (RECS). I estimate a demand equation for natural gas and find that variables that proxy for
efficiency overall have negative effects on fuel consumption, suggesting that the savings from efficiency are greater than the rebound effect. I also estimate a model for thermostat settings and find that fuel price and efficiency-related variables are
generally not significant determinants.
