Jevons’ Paradox – Save Energy To Save Money

It’s Jam Band Friday –

The problem with this Economist Mentality is that it is ungoverned. Any income issue that constantly rises, crashes under its own weight. Another issue is the dramatic increase in population in the last 100 years. Over all America’s consumption is down in the last 20 years and that is a fact jack. But environmentalists waffle…

The Specter of Jevons’ Paradox

by Jeff Dardozzi

It is an article of faith within the sustainability movement that resource efficiency improvement must be the main response to Peak Oil and Climate Change. The recurring mantra in our culture is that technological silver bullets will save the day. It is widely believed that increased resource efficiencies coupled with widely deployed renewable energy technologies will rescue the earth from catastrophe and salvage Western civilization from ecological and societal collapse. Furthermore, such a strategy will usher in a new relationship with nature that secures her for generations to come. As with most articles of faith, belief in them is a difficult thing to shake even in the face of compelling evidence to the contrary.

In the early eighties, an old debate within economics resurfaced surrounding something called Jevons’ Paradox, or the more descriptive term rebound effect. Many well-known minds, such as Amory Lovins, piped in on the new meaning of this old, obscure argument buried in 19th century classical economics. First coined by the economist W. Stanley Jevons in The Coal Question (1865), the paradox he noted was in regards to coal consumption and efficiency improvements in steam engines: “It is a confusion of ideas to suppose that economical use of fuel is equivalent to diminished consumption. The very contrary is the truth.”

As with most articles of faith, belief in them is a difficult thing to shake even in the face of compelling evidence to the contrary.

In the 1980s, Jevons’ observation was revisited by the economists Daniel Khazzoom and Leonard Brookes. In their analysis, they looked beyond the relationship between energy resources and the machines that convert them to useful work to consider the overall effect of technological improvements in resource efficiencies on the energy use of a society as a whole. They argued that increased efficiency paradoxically leads to increased overall energy consumption. In 1992, the economist Harry Saunders dubbed this hypothesis the Khazzoom-Brookes Postulate and showed that it was true under neo-classical growth theory over a wide range of assumptions. Since the appearance of the Khazzoom-Brookes Postulate, numerous studies have weighed in on the debate arguing a range of impacts of the rebound effect.

…increased efficiency paradoxically leads to increased overall energy consumption.

In January 2008, Earthscan released Jevons Paradox: The Myth of Resource Efficiency Improvements as the latest and most comprehensive review of the paradox in economics literature. Prefaced by anthropologist Joseph Tainter (The Collapse of Complex Societies, 1988), the book reviews the history of the debate, current findings and includes the latest multi-disciplinary studies regarding the existence of the rebound effect. The book clearly supports the proposition that the rebound effect is present in the US, Europe and most other economies and that strategies to increase energy efficiency in themselves will do little to improve the energy or the ecological situation. In fact, they may well worsen it as the historical impact of resource efficiency improvements shows that increasing the efficiency in the use of a resource in turn increases the consumption of that resource.

The devil is in the details

The crux of the argument lies in the fact that when you save money through improvements in efficiencies, such as with gas mileage or heating costs, invariably that savings has two effects. First, it decreases demand for an energy resource, which reduces the price of the resource. This then reveals a new layer of demand that, in turn, increases consumption of that resource. Such behavior can be found most everywhere in the economy. In analyzing homes over the last 50 years we see their energy efficiency improved dramatically but the square footage more than doubled and the number of occupants more than halved. Even though the heat load of today’s homes may be less than that of 50 years ago, the total embodied energy and operational requirements per occupant home is far greater due to size, composition, occupancy and lifestyle – all predicated on resource efficiency improvements.

Word processing is another example of the Paradox at work. Before the advent of personal computers, producing a professional typewritten document was quite arduous, time consuming and expensive. Once computers, printers and networks came onto the scene, there was widespread hype that we would no longer need paper and the “paperless office” was bandied about as one of the great resource conserving aspects of technology. Everyone knows what happened – paper consumption skyrocketed because the cost per word to print plummeted.

The same thing happens with highway improvements. Every increase and improvement made to the carrying capacity of highways invariably leads to an increase in traffic congestion, housing development and maintenance regimes. Efficiency improvements in battery storage technology and the energy efficiency of micro-circuits along with efficiency improvements in production and infrastructure have fueled the explosion in digital technologies, all of which increase demand for energy and resources. The paradox is everywhere.

The second effect resulting from efficiency improvements is that when you save money you usually spend it somewhere else in the system of production, and that translates into increased energy and resource consumption. The worst thing you could do is save it in the fractional reserve banking system where the multiplier effect can compound your savings to recycle it into the economy at 10 times what it would have been if you had just spent the money yourself.

Even those who argue for the “sackcloth and ashes” approach to sustainability through lower consumption, simplicity, and reduced reliance on fossil energy are haunted by Jevons ghost. As the ecological economist Blake Alcott notes in The Sufficiency Strategy: Would Rich-world Frugality Lower Environmental Impact?

However, given global markets and marginal consumers, one person’s doing without enables another to “do with.” In the near run the former consumption of a newly sufficient person can get fully replaced. And given the extent of poverty and the temptations of luxury and prestige consumption, this near run is likely to be longer than the time horizon required for a relevant strategy to stem climate change and the loss of vital species and natural resources.

The claim of reducing material standards voluntarily as a means to reduce environmental impact may be sound at the local or regional level, but in the global marketplace such claims are demonstrably false. As countries like China and India work their way through the late stages of primitive capital accumulation, they are stepping into the consumptive paradigm full force with over two billion consumers anxious to take up any slack. India’s boast of the Tata, the world’s cheapest automobile, and the prospect of a billion new cars on the road by the middle of the century haunt the Western world as the ghosts of Prometheus and Pandora reappear before our eyes.

…China and India…are stepping into the consumptive paradigm full force…


If they are not saying it is inevitable then they are saying the only way around it is to unplug.


Household appliances provide the best example that efficiency gains really do stick. Take refrigerators (which can use as much as 14 percent of a household’s total energy). Until the late 1970s, the average size of our refrigerators increased steadily and then began leveling off. But, during the same period, the energy those refrigerators used started to decline rapidly. Today’s Energy Star refrigerators are 40 percent more efficient than those sold even seven years ago. After all, there is a maximum size to the refrigerator you can easily put in a kitchen and a limit to the number of refrigerators you need in your house. In short, improvements in efficiency have greatly outpaced our need for more and larger storage spaces.

One problem in applying Jevons’ Paradox to today is the fact that back in 1885, coal was getting cheaper every day. The authors

“suggest that taxes could make up for any savings introduced by efficiency improvements, thereby avoiding the paradox. In the United States, at least, this approach is politically infeasible, but the general principle is sound.”

Holladay suggests an alternative: voluntary simplicity.

I’m calling instead for the voluntary adoption of a simpler lifestyle: one with less work, fewer possessions, and more leisure time. A graceful transition to such a lifestyle would be the greatest possible gift to our children and grandchildren.

Certainly TreeHugger territory, but not an easy sell. However we are in a very temporary bubble of reduced consumption; many are living lives of involuntary simplicity now and when oil prices come back, will have an even harder time. It is a smackdown between Adam Smith and William Jevons; when stuff is expensive, people use less of it. And prices are going to rise, whether we tax them or not.

More at Green Building Advisor

More on Jevons Paradox in TreeHugger:

Beating the Energy Efficiency Paradox (Part I)
Beating the Energy Efficiency Paradox (Part II)
Survey Indicates Americans Deluded On Energy Conservation. Are They Really?


So it goes..

Have a great weekend


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