The conventional wisdom is that improving energy efficiency will lower energy use. However, there is an extensive debate in the energy economics/policy literature concerning "rebound" effects. These occur because an improvement in energy efficiency produces a fall in the effective price of energy services. The response of the economic system to this price fall at least partially offsets the expected beneficial impact of the energy efficiency gain. In this paper we use of an economyenergy-environment Computable General Equilibrium (CGE) model for the UK to measure the impact of a 5% across the board improvement in the efficiency of energy use in all production sectors. We identify rebound effects of the order of 30% -50%, but no backfire (no increase in energy use). However, these results are sensitive to the assumed structure of the labour market, key production elasticities, the time-period under consideration and the mechanism through which increased government revenues are recycled back to the economy. 3Section 1:

Resource Productivity is increasingly seen as an important aspect of sustainability by governments world-wide. Making more with less seems to be intuitive in terms of reducing the burden on the environment while allowing for economic development. In the UK policy context there appears to be an acceptance that enhanced resource productivity is "good for the environment". However, there is a debate in the literature concerning the possibility that any beneficial impact on the environment may be partially ("rebound") or even more than wholly ("backfire") offset. This paper clarifies the theoretical conditions under which such effects would occur and explores their likely significance using a computable general equilibrium (CGE) model of the Scottish economy. We find that an improvement in energy efficiency ultimately increases energy use and results in a worsening of the GDP to CO2 emissions ratio. The time interval of analysis proves significant, with rebound effects eventually growing into backfire. The reason is simple: energy efficiency improvements result in an effective cut in energy prices, which produces output and substitution effects that stimulate energy demands. However, the presence of backfire effects does not imply irrelevance of efficiencyenhancing policies: rather it implies that such policies alone are insufficient to improve the environment. The implication is that energy policies need to be co-ordinated. JEL Classification Q01, Q40, Q43

The UK electricity system is likely to face dramatic technical and institutional changes in the near future. Current UK energy policy focuses on the need for a clean, affordable and secure energy supply. Decentralisation of the electricity system is recognised as one means of achieving efficient and renewable energy provision, as well as addressing concerns over ageing electricity infrastructure and capacity constraints. In this paper we provide a critical literature review of the economics of increased penetration of distributed energy generation. We find that there exists a large volume of research considering the financial viability of individual distributed generation technologies (and we are necessarily selective in our review of these studies, given the wide variety of technologies that the definition of distributed generation encompasses). However, there are few studies that focus on the pure economics of individual or groups of distributed energy generators, and even fewer still based on the economy-wide aspects of distributed generation. In view of this gap in the literature, we provide suggestions for future research which are likely to be necessary in order adequately to inform public policy on distributed generation and its role in the future of UK energy supply.

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This paper investigates the economic impact of a 5% improvement in UK household energy efficiency, focussing specifically on total energy rebound effects. The impact is measured through simulations using models that have increasing degrees of endogeneity but are calibrated on a common data set, moving from a basic partial equilibrium approach to a fully specified general equilibrium treatment. The size of the rebound effect is shown to depend on changes in household income, aggregate economic activity and relative prices that can only be captured through a general equilibrium model.