Jevons Paradox and the Curse of Energy Efficiency

Energy efficiency is often touted as the easiest and least painful method for reducing CO2 emissions.  The basic rationale is simple enough – if you switch to compact florescent bulbs or a fuel-efficient car, you can achieve the same amount of work for a fraction of the energy.

It’s difficult to question this logic.  We have very limited resources and should do everything in our power to conserve them.  In the US especially, our energy usage is off the charts.  We represent roughly 5% of the world’s population but consume 19% of global energy resources (second only to China).   Even conservative efforts to reduce oil, gas, and coal consumption in the US could have dramatically positive effects on climate change and the future of this planet.

The standard light bulb that we use in the US is a perfect microcosm of America’s profligate use of energy.  Less than 10% of the electricity used to power an incandescent light bulb comes out as actual light, with the remaining 90% emitted as wasted heat.  Similar mind-boggling ratios exist throughout our industrialized economy – there clearly exist opportunities to combat the destructive effects of fossil fuel by reducing our wasteful habits and consuming energy more responsibly.

Energy Efficiency – Panacea, Band-Aid, or Poison?

While writing a paper on renewable energy innovation, I learned about William Stanley Jevons and his 1865 paradox outlining the long-term futility of energy efficiency.  In studying England’s coal use after James Watt’s perfection of the steam engine, Jevons noticed a startling trend.  Watt’s engine was vastly superior to previous designs, using much less energy to produce the same results as earlier coal-based technologies.  But rather than reduce the overall amount of energy consumed, this more efficient engine actually stimulated increased demand for coal.

In effect, greater efficiency simply made each unit of coal cheaper to buy, thus, increasing the total amount of coal consumed.  One need look no further than the standard supply/demand curve to understand how this works – as the price of a good goes down, demand for that good increases.

Efficiency and the Dangers of Aggregate Energy Demand

More than 100 years after Jevons’ observations, two economists, Daniel Khazzoom and Leonard Brookes, continued the efficiency debate, focusing on the performance standards mandated by the California Energy Commission.  They determined that policies regulating greater efficiency could have the adverse effect of boosting demand and overall energy use.

Fellow economist, Harry Saunders, went on to argue that not only does the price of each energy source become cheaper with greater efficiency, but also, cheaper energy sources help to grow the national economy.  This has an indirect effect on aggregate energy consumption as more people begin purchasing refrigerators, cars, and other power-hungry items in much greater numbers.

In a nutshell, greater energy efficiency makes fuel cheaper to buy, leading to increased energy consumption, both as a result of cheaper oil prices and growing demand for consumer items.

Jevons Paradox in Practice

If you find it difficult to swallow the notion that “efficiency is destructive,” I certainly wouldn’t blame you. However, the doomsday predictions of Jevons, Khazzoom, Brookes, and Saunders are not merely theoretical musings – we’ve witnessed the counterintuitive coupling of greater efficiency and increased usage time and time again over the years.

Following the OPEC oil crises of the 1970s, manufacturers began phasing out America’s iconic, gas-guzzlers in favor of smaller, more fuel-efficient models.  Lighter, faster, and less polluting, the cars of the 1980s and beyond held the promise of decreased dependence on foreign oil.

But an interesting thing happened. 

We simply began driving more.  We moved out to the suburbs.  We began shopping at megamalls miles outside of town.  We bought cars for our children since, even with part-time jobs, they could keep their tanks full.  The cars of today are 150% more fuel efficient than those of the pre-OPEC crises, but because the relative price of energy keeps falling due to increased efficiency, we simply consume more and more.

We can see this same trend in other places.  Just think about what you might have plugged into a wall socket circa 1960 compared to what you typically plug in today.  In addition to turntables, TVs, laundry machines, fridges, and lamps, we now have computers, clock radios, air conditioners, routers, modems, alarm systems, dishwashers, microwaves, juicers, cell phone chargers, and printers.

So What Does Energy Efficiency Mean for Us?

If increased efficiency has the opposite effect of greater aggregate energy use, how should we frame the issue moving forward?

That is a very good question.  We undoubtedly need to take a closer look at the technologies, policies, and attitudes that influence energy consumption at both the micro and macro level.  While I don’t have any easy solutions to offer, I still see tremendous potential in our continued push towards energy efficiency – especially if this push accompanies renewable forms of power generation.

If we increasingly rely on solar and wind sources, then each improvement in energy efficiency moves us closer to that point where renewables cover all of our energy needs.  The question remains – can we deploy solar and wind technology at a faster rate than Jevons paradox unfolds?

I believe that we can – even when you factor in China and India’s rapidly growing hunger for energy and all the modern amenities that accompany such growth.

I still believe that energy efficiency is increasingly necessary – turn off the lights when you’re not using them, replace any appliances that use electricity inefficiently, and upgrade to a hybrid car if your budget allows.  True, each of these changes might ultimately feed into Jevons paradox, but there exist many potential benefits as well – benefits that will only become more pronounced as renewables become cheaper with time and fossil fuel prices continue to rise.

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