Efficiency traps beyond the climate crisis: exploration-exploitation trade-offs and rebound effects

Abstract

Copyright © 2023 The Authors. Higher levels of economic activity are often accompanied by higher energy use and consumption of natural resources. As fossil fuels still account for 80% of the global energy mix, energy consumption remains closely linked to greenhouse gas (GHG) emissions and thus to climate change. Under the assumption of sufficiently elastic demand, this reality of global economic development based on permanent growth of economic activity, brings into play the Jevons Paradox, which hypothesises that increases in the efficiency of resource use leads to increases in resource consumption. Previous research on the rebound effects has limitations, including a lack of studies on the connection between reinforcement learning and environmental consequences. This paper develops a mathematical model and computer simulator to study the effects of micro-level exploration–exploitation strategies on efficiency, consumption and sustainability, considering different levels of direct and indirect rebound effects. Our model shows how optimal exploration–exploitation strategies for increasing efficiency can lead to unsustainable development patterns if they are not accompanied by demand reduction measures, which are essential for mitigating climate change. Moreover, our paper speaks to the broader issue of efficiency traps by highlighting how indirect rebound effects not only affect primary energy (PE) consumption and GHG emissions, but also resource consumption in other domains. By linking these issues together, our study sheds light on the complexities and interdependencies involved in achieving sustainable development goals.