Jevons Paradox: Energy Efficiency’s Dark Side?
Energy efficiency (EE) came up in a couple of recent posts here, one of which urged more government investment in EE measures. Sometimes in discussions of EE, caution is raised due to what is known as Jevons paradox. The idea is that efficiency improvements in the use of a resource can lead to increases in the consumption of that resource, rather than the decrease that may have been intended. For instance, suppose an electric power plant is upgraded so that it uses its input fuel more efficiently. Then further suppose that some of the savings are passed on to the customers. Where maybe the customers were more conservative in their use of electricity before, the lower prices allow them to utilize it more heavily without worrying about the expense. William Stanley Jevons’ original observation was of efficiency increases in coal-fired steam engines in 19th century England. (See this page for more background information on Jevons paradox.)
But is it real? Two sustainability innovators who have appeared indirectly on this site take opposing viewpoints. This piece on treehugger by the Rocky Mountain Institute (RMI) considers the effect with regard to hybrid vehicles, green buildings, household appliances, and per-capita electricity use and concludes that it is not significant, backing up its view by citing stats and studies. Electricity seems like the one to watch, and the evidence comes only from Vermont and California, so is not totally convincing of the absence of the paradox in that area. The RMI was co-founded by Amory Lovins, one of the co-authors of the book Natural Capitalism (mentioned in this prior greenOR post about EE). The notion that great emphasis should be placed on EE in the overall energy picture, and even overall sustainability picture is a key element of that book.
On the other hand, Wes Jackson, an agriculturalist who received a great deal of attention in the book Ecological Design (summarized here) believes the effect to be real. He makes the claim in an interview with the magazine Mother Jones (Oct 29, 2008), though he does not provide much in the way of support. Here is part of what he says:
We really need to get people thinking—No. 1: Arrest this idea that the solutions to our problems are primarily technological. I mean, that comes out of technological fundamentalism. The solutions to our problems have to do with restraint and conservation, cutting back, making do, and so on. The belief that we are going to “efficiency” our way out of this is to ignore Jevons Paradox.
He does point to carbon caps as part of the solution. Jackson does not explicitly state it, but the idea here is that coupling energy efficiency gains with some form of government regulation that reduces the demand will counter Jevons paradox. (Incidentally, the interview is an interesting read; Jackson talks about transforming agriculture to a mix of perennial plants from the present-day monocultures of annuals, so as to reduce soil erosion.)
With regards to OR, this effect can change the playing field for the modeler and the decision maker. Consider the electric power example above from the point of view of the utility. Some of the utility’s demand is met with energy efficiency, leading to a lower overall portfolio cost since EE is typically the cheapest energy. If this passes through to the customer, demand could rise. So demand depends on cost, which depends on the amount of energy efficiency implemented, which depends on demand, and so on. The effect would be the same if another form of energy came in with a low cost. The paradox is that not everyone thinks of energy efficiency translating to increased consumption.