Do increases in resource productivity improve environmental quality and sustainability

Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Ecological Abstract Resource Productivity is increasingly seen as an important aspect of sustainability by governments worldwide. 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 efficiency-enhancing policies: rather it implies that such policies alone are insufficient to improve the environment. The implication is that energy policies need to be coordinated .