Report

Teaser, summary, work performed and final results

Periodic Reporting for period 1 - EFFECT (Effective environmental policies in Europe in the context of rebound effects)

Teaser

European policymakers are increasingly concerned about the unsatisfactory outcomes of efforts to harmonise economic growth and welfare with environmental quality, in particular due to the so-called rebound effects. The main objective of the EFFECT project is to develop...

Summary

European policymakers are increasingly concerned about the unsatisfactory outcomes of efforts to harmonise economic growth and welfare with environmental quality, in particular due to the so-called rebound effects. The main objective of the EFFECT project is to develop innovative methods to identify and quantify key rebound effects, and assess their potential to impede the achievement of environmental targets in Europe. Some specific research objectives are: (1) review and classification of key environmental policies and targets in the EU and Member States in the context of rebound effects; (2) improvement of theoretical and methodological aspects of macroeconomic models used in rebound effect studies by integrating the ‘environmental rebound effect’ perspective; (3) assessment of the impact of rebound effects via EU and country-level ex post assessment of past key environmental policies and ex ante assessment of future policy scenarios and (4) proposal of recommendations to achieve net environmental savings from environmental policies, including optimal combinations and configurations, as well as optimal levels of welfare and economic development and equality. To attain such objectives, the EFFECT project will design an innovative analytical framework by combining an interdisciplinary perspective with micro and macro-level aspects of rebound effects. Such framework would allow a more comprehensive and scientifically-sound study of the interplay between rebound effects and policy. In the context of the pursuit of a sustainable economic growth in Europe, this project can aid European policymakers in the design of effective environmental policies. Furthermore, the development of innovative and state-of-the-art analytical frameworks aimed at tackling exceptional societal challenges such as climate change resonates with the ambition of putting Europe’s in-house science and researchers at the forefront of worldwide scientific excellence.

Work performed

Work Package 1 offers a review and classification of key environmental policies in Europe in the context of rebound effects. Specifically, we reviewed the state of knowledge of rebound effects from resource efficiency policies, from which research priorities were derived. Moreover, we focused on policy areas and associated interventions as described in the ‘The Roadmap to a Resource Efficient Europe’ (RREE) from the European Commission (EC), and described knowledge gaps and derived policy recommendations accordingly.

Work Package 2 focused on analytical tools, methods, and data. We developed a modelling approach that combines a technology-rich model based on life cycle assessment (LCA) and a behaviourally-realistic model for the global economy based on computable general equilibrium (CGE) modelling. The code required to run the model has been stored and documented in the GitHub repository ‘R-based tools for industrial ecology research’ (https://github.com/dfontv/Rtools).

Work Package 3 analysed ex-post and ex-ante scenarios of policy effectiveness in the context of rebound effects. The main case study focused on a subsidy on electric cars in the United Kingdom (UK). The main results describe significant economy-wide rebound effects associated with the subsidy which offset partly or completely any environmental gains achieved. The results also show the important role of macro-economic effects from price changes, particularly how the shift from petrol to electricity triggered additional demand for cheaper petrol.

Work Package 4 focused on policy recommendations to achieve environmental goals through effective policy. Specifically, we provided guidance on the role of LCA and macro-economic effects in policy impact assessment as well as knowledge gaps and research priorities. We also inferred recommendations based on the results of the case study on UK’s electric car subsidy, focusing on correcting potential policy and market failures. Specifically, we suggest that the subsidy may be too generous, and that more effective policy mixes are possible. Furthermore, externalities leading to large economy-wide rebound can be largely corrected by means of environmental taxes, with the proposed model being particularly valuable to test different policy mixes and tax rates.

Overall, 29 dissemination activities were or are planned to be carried out in the context of EFFECT: 7 seminars, 6 presentations at scientific conferences, 1 lecture, 14 peer-reviewed scientific articles (of which 4 report according to the objectives of the project), and 1 book chapter.

Final results

The model developed in EFFECT is a step forward for the macro-economic assessment of policy-induced rebound effects. The model combines the high technology detail offered by life cycle assessment (LCA) and macro-economic market behaviour from a computable general equilibrium model (CGE). Hybrid LCA-CGE models are scarce, and their application to study rebound effects is largely unexplored in the literature. Specifically, our model provides methodological advances on the following aspects:

- Both LCA and CGE are integrated in a single framework using consistent assumptions and benchmark data. For example, physical life cycle inventories are being used to construct new sectors into the CGE model.
- Both micro and macro-economic rebound effects are calculated for multiple environmental indicators and through a life cycle perspective, allowing to identify trade-offs across impact categories and life cycle stages.
- Policy counterfactuals are built and integrated into the model using multiple regression models based on panel data. This avoids the generalisation of exogenous and costless technical changes from policy.

Moreover, the project delivered novel insights into the effectiveness of policy to deliver environmental gains in the context of rebound effects. Specifically, the results showed that the UK’s subsidy on electric cars is associated with notable economy-wide rebound effects, with a large share due to additional demand for cheaper petrol fuel. This approach can be used to determine optimal policy configurations to achieve environmental targets as well as the implications of market-correcting instruments such as carbon taxes

Website & more info

More info: http://effectprojectblog.wordpress.com.