by Eric Bloom

A recent article in The New Yorker by David Owens (subscription required) reignited a long-standing debate in the energy efficiency world about the potentially unintended consequences of increased energy efficiency in the free market. The debate surrounds the concept known as the Jevons Paradox, coined by the English economist William Stanley Jevons in 1865. In his book The Coal Question Jevons argues that increasing resource efficiency has the effect of lowering prices and increasing demand for that resource to the point that overall resource consumption increases and offsets the resource use reductions of efficiency.

Needless to say, the idea that increasing energy efficiency is futile has ruffled many feathers in the energy world, so I wanted to take an opportunity to throw out a few of my own thoughts on the topic. While I believe that there may be certain circumstances in which efficiency would increase overall consumption, efficiency will remain an effective, central part of the overall energy reduction challenge. Here’s why.

If the Jevons Paradox were borne out in reality, wouldn’t utilities have figured out long ago that the pathway to increased revenues is to provide incentives for ratepayers to buy more efficient appliances and equipment? According to the Jevons Paradox, such a policy would lure unsuspecting ratepayers into consuming more energy and generating more revenue for utilities. As we know all too well, though, this is not the reality today. Utility revenues are still primarily dictated by electricity sales, and the decoupling and other utility efficiency programs that we have today are largely in place because of laws that require or incentivize them, not the Jevons Paradox.

To be fair, I can imagine certain instances that would demonstrate the Jevons Paradox. For example, if airplanes were far more efficient with jet fuel than they are today, the costs of flight would come down enough that people would fly more. In cases like these, energy costs do constrain consumption and, if efficiency could drive those costs down significantly, consumption might increase and offset a significant portion of the savings.

But with the vast majority of things we use energy for – such as heating, cooling, and illuminating buildings – energy costs are not so much a constraint as they are a necessary part of creating comfort. It’s not as if people set their thermostats at 72 degrees because the cost of keeping their homes at 90 degrees is prohibitive; they keep the temperature at 72 degrees because it’s comfortable and the advent of efficient furnaces won’t change that.

The situation is similar in the case of lighting. Take the case of compact fluorescent light bulbs (CFLs). CFLs can produce the same number of lumens (the measurement of actual light output) as incandescent bulbs with much less energy. In Jevons’ theory, adoption of CFLs would make people want to spend more on lighting. So why haven’t we seen a market for that “extra bright” CFL that will make your home five times brighter than ever before? Because people want right light, not more light. These two areas (space heating and lighting) alone represent about three-fifths of residential energy consumption in the U.S., and the story is similar for other end uses as well.

On a global scale, the impacts of efficiency would be largely the same as these examples suggest; lower operating expenses for the same level of service. While economic development and increased personal wealth will lead people to follow more energy-intensive lifestyles, efficient heaters and CFLs won’t be the cause. (And when we halve the cost of flights to Honolulu through efficient jet-setting, let me know. I’m interested.)

Photo by webtreats/flickr/Creative Commons

Eric Bloom is a green building and renewable energy analyst for Pike Research.