Surprise! Increases in Energy Efficiency Lead to More, Not Less, Energy Use

[Metal]

Surprise! Increases in Energy Efficiency Lead to More, Not Less, Energy Use

John Clinkard

Contrary to what most people believe, increases in energy efficiency usually mean a rise in energy consumption, not a reduction. This apparently counter-intuitive statement is supported by basic economic logic and was recently summarized in an article written by economists Jeff Rubin and Benjamin Tal of CIBC World Markets.

According to the Khazzoom-Brookes postulate first put forward by U.S. economist Harry Saunders in 1990, “energy efficiency improvements… that are economically justified on a micro level lead to higher levels of energy consumption at the macro level.”

As early as 1865, William Stanley Jevons (a pioneer of economic theory) observed that as technological improvements increased the efficiency with which a resource is used, total consumption of that resource has the potential to increase, not decrease.
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Examples from History
For example, after James Watt introduced his more energy efficient coal-fired steam engine, coal became a more effective power source. This increase in efficiency in turn led to increased use of steam engines in industry and caused coal consumption to increase tenfold between 1830 and 1860.

In a more current context, Daniel Khazzoom observed that although demand for oil dropped immediately following the OPEC price shocks, it rebounded not long after.

In the United States, higher energy prices have led to a 30% increase in the average miles-per-gallon rating for a given vehicle. However, over the past 25 years, per vehicle fuel consumption has changed little. This trend reflects the fact that people now are able to travel greater distances in larger vehicles.

Another Example: Now More Aircraft using More Fuel than ever Before
According to the CIBC article, air travel has followed a similar pattern. Higher oil prices have led to the development of more fuel-efficient aircraft and that development in turn has made air travel cheaper and more popular. As a result, there are more aircraft in the air using more fuel than ever before.

It appears that, as long as we are able to get more energy out of a barrel of oil (even a more expensive one), we will use more, not less.

 

[webbie]

Somewhat true.....but, at the same time we have increased our individual footprint vastly since the 70's, yet total per person energy use has stayed about even for 25 years. I think some states like Ca. have even gone down in energy consumed per person.

 

[slowzuki]

I suppose its actually because our disposible income has increased faster than total energy costs have risen. Increased efficiency is just a factor in the cost. Listening to fuel and insurance costs my grandparents paid, it cost them a bigger % of their income to use a car than me, so of course as things become cheaper we use more. Look at food, some places food accounts for half your income. You'd better believe there are not a lot of fat people, here food is so cheap we don't even think about it hardly.

 

[Sandor]

Yes, its called Jevon's Paradox, and is highly touted by the doomer crowd on other boards.

It goes like this:

Hey, we are saving a hundred bucks a month since we started burning wood for heat. Now we can afford the 50 inch plasma TV!

 

[Burn-1]

In the United States, higher energy prices have led to a 30% increase in the average miles-per-gallon rating for a given vehicle. However, over the past 25 years, per vehicle fuel consumption has changed little. This trend reflects the fact that people now are able to travel greater distances in larger vehicles.

It appears that, as long as we are able to get more energy out of a barrel of oil (even a more expensive one), we will use more, not less.

Jevons' paradox has a fatal flaw in that it assumes the cost of the resource remains constant. So for example, if average fleet mpg efficiency doubles and gas prices stayed the same then we could drive twice as far for the same cost and we would likely use more of it since we have more of something valuable. (personal mobility), and no loss of income. But using the example above, while average mpg may have increased 30%, (probably something like going from 18 to 25 mpg), the cost of fuel has gone up way more than 30%. Lots of other boring stuff involved as well.

Since demand for petroleum continues to rise so the more likely scenario is that greater efficiency will be required just to remain standing still in terms of vehicle use until more substitutes become available. Because there are so few energy dense substitutes for gasoline, the demand is pretty inelastic.

Sandor you're talking about income and substitution effects which tangentially related and in the case of your example really disheartening.