I’d like to discuss an issue that probably isn’t sufficiently studied or addressed. If the Jevons paradox is relevant for today’s energy consumption and efficiency problems (or to other resources), then it is certainly worth further investigation.
The “Jevons paradox” (which I briefly mentioned in a previous post) is the idea that improved energy (and other material-resource) efficiency ultimately tends to lead not to conservation but to increased consumption. It’s named after the English economist William Stanley Jevons, who in his book The Coal Question (1865) observed that the coal-powered steam engine made coal a more cost-effective power source, leading to the increased use of the steam engine in a wide range of industries. This in turn increased total coal consumption and depleted reserves, even as the amount of coal required for any particular application fell. He argued that increased efficiency in the use of coal as an energy source only generated increased demand for that resource, not decreased demand, as one might expect. This was because improvement in efficiency led to further economic expansion.
Jevons was wrong about a few points: he failed to foresee the development of energy substitutes for coal, such as petroleum and hydroelectric power, or that coal supplies would take a long time to be exhausted. But the “Jevons paradox” appears to be a very important insight that has lately become a popular issue again (see for example, this New Yorker piece). In addition, some consider it an extreme version of the “rebound effect”, in which there is a rebound of more than 100% of “engineering savings,” resulting in an increase rather than decrease in the consumption of a given resource. In other words, savings from efficiency are used for additional consumption, thus cancelling the savings. In light of recent efforts to improve energy efficiency, the significance of Jevons paradox effects has understandably generated considerable debate (such as here and here).
If the Jevons paradox and rebound effect are real, then this has important policy implications. It does not mean that efforts for improving efficiency in homes, businesses, and vehicles are wasted, but it does mean that those efforts by themselves won’t reduce energy consumption and carbon emission. Major environmental problems like climate change cannot be solved by purely technological methods in a “free market”. In addition, cap-and-trade systems might not be as successful as hoped in terms of reducing emissions (for example, see this critique of California’s cap-and-trade program, which allows carbon offsets). There is no simple solution, but energy efficiency goals should be combined with other strategies and policies for reducing demand for fossil fuels, such as a carbon tax, requiring utilities to generate a higher fraction of their electricity from renewables, requiring automakers to increase fuel economy standards, etc. Some of these would be less popular with particular industries because it would be a bigger break from business-as-usual, but business-as-usual is clearly worsening climate change (and other resource-related environmental problems, such as involving water resources and pollution). Any effective strategy must cut carbon emissions deeply enough to avoid the worst effects of climate change, which means at least 80% below 2000 levels by 2050. The transition to a low-carbon economy will be a difficult one.