Jevons paradox observes that increased energy efficiency leads to more energy consumption. What’s the way out?
In his 1865 book “The Coal Question,” English economist William Stanley Jevons noted that increased efficiency in machines that burned coal for fuel led not to a decrease in coal consumption as one might expect, but an increase. After the Watt steam engine greatly improved fuel efficiency, for example, coal consumption skyrocketed.
“It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth,” Jevons wrote.
This was because the increased efficiency in effect made coal cheaper, as people could get more energy from the same amount of coal. This effect became known as the Jevons paradox, and it still bedevils us today in an era of increasing energy efficiency and increasing demand.
Today’s Jevons Paradox
As engineering and design technology improve, we continue to produce devices that use energy more and more efficiently, from cars to lights to heating and cooling. That’s a good thing, right? That question is more difficult to answer than you might think.
“The reduction of the consumption of coal, per ton of iron, to less than one-third of its former amount, has been followed, in Scotland, by a ten-fold total consumption, not to speak of the indirect effect of cheap iron in accelerating other coal-consuming branches of industry,” Jevons observed.
The first order effect is that, yes, those devices use less energy per minute or mile than they did before. But in the second and third order, there are rebound effects. People are people, and they make human decisions. If your car gets better gas mileage, you might drive more rather than choosing to walk on short trips. A Nissan study found that EV owners drive on average 370 more miles per year than people with gas-powered cars. If LED lights lower your electric bill, maybe you leave the Christmas lights up a little longer or install more lighting in the backyard. If it doesn’t cost as much to keep your house at an optimal temperature, maybe you run the air conditioning more.
Indirectly, say increased energy efficiency doesn’t lead to an increase in demand, or there’s still aggregate savings even with the extra demand. What are people spending that saved money on? If it’s something that requires more energy to produce than the amount of energy that was saved, it’s a net inefficiency. Those third order effects are nebulous, perhaps even impossible to measure. Still, with any technology that gains widespread currency in society, we tend to see the Jevons paradox in action.
Is Efficiency Bad?
Knowing the prevalence of the Jevons paradox, it leads us to wonder if we are inadvertently making the climate crisis worse with many of our efficiency measures.
“Should we stop encouraging energy efficiency and energy conservation? Are we generating undesired effects, and getting further from achieving sustainability or mitigating climate change?” Institute for Economic Analysis research scientist Jaume Freire González asked.
Fortunately, the answer seems to be no. Some of our efficiency gains are offset by increased usage, but improved energy efficiency is still a net good. That is especially true given population trends that will see 10 billion humans alive on Earth sometime in the next half-century.
The rebound effects in the Jevons paradox do vary in magnitude. For example, the rebound effect of driving more miles is pretty low, no more than 20%.
Energy efficiency is also one of the technological advancements that drives economic progress and wealth creation, hugely important for human prosperity and improving quality of life. It’s worth doing, but we need to do it well.
“The potential damage of the Jevons paradox on energy and climate efforts compels us to use a multidisciplinary lens, which acknowledges the intrinsic complexity of policy making and fully accounts for the economic, social, and behavioral forces involved in the process,” González wrote.
Solutions
We shouldn’t, then, scrap energy efficiency efforts. But because of Jevons paradox, efficiency alone will not be enough to meet climate goals. Public policy will have to incentivize the use of renewable energy sources. If the savings from increased efficiency goes to buying products made with renewable energy, or if the extra consumption in the second order comes from renewables, those Jevons paradox rebound effects are not so harmful.
Regulations putting a cap on emissions and taxing carbon and energy use can lessen the rebound effects as well. Measures like congestion pricing can reduce traffic jams and thus emissions.
“It’s a law of nature, I’d say, or at least of Economics 101: Inexpensive anything will never be conserved,” energy policy analyst Charles Komanoff wrote.
So, in cases where an energy source is cheap but harmful, government policies will have to artificially raise the price to discourage use and protect the common interest. In the long-term view, fuels that harm the climate and make life more difficult for humanity as a whole are ultimately inefficient. Making them more expensive, then, actually helps promote efficiency by driving consumers to renewables.
As González concluded, there’s no silver bullet to solving Jevons paradox. But given the direction energy usage is heading, pushing as much of that consumption to renewables is as good as we have.