Does Improving Efficiency Actually Reduce Energy Use?

At first glance, it seems like if machines became more efficient, we would use less energy—after all, we would keep using them as usual, so energy would decrease, right? Early economist William Stanley Jevons disagreed after finding in the mid-1800's that more fuel-efficient steam engines were used more because they were cheaper to run. 

This fits in line with basic supply and demand—a decrease in price will cause an increase in demand. Thus, Jevons paradox was born—efficiency gains often reduce prices, which then increases consumption, negating the effect of the efficiency gain. William Stanley Jevons was a brilliant economic mind, and would probably be one of the most famous economists if he hadn't died at 42. In his 1865 book "The Coal Question", he argued that Britain's success depended on its wealth of coal, which the country was quickly using up.¹

This paradox may not occur for many household machines for which consumers cannot readily determine the actual price of use. For machines with a clear price, however, supply and demand basics apply. If an efficiency gain makes prices cheaper, it is only intuitive that consumers will use the good more—a great example is efficient cars.

"The first fuel-economy regulations for U.S. cars—which were enacted in 1975, in response to the Arab oil embargo—were followed not by a steady decline in total U.S. motor-fuel consumption but by a long-term rise, as well as by increases in horsepower, curb weight, vehicle miles travelled (up a hundred per cent since 1980), and car ownership (America has about fifty million more registered vehicles than licensed drivers)." - The New Yorker

Additionally, expansions in the amount of paved roads, gas stations, fast food restaurants, and more have made driving more easier. So even as cars have become more efficient, people have begun to drive much more, and energy use has skyrocketed. 

It will remain up to individual preferences, of course, whether or not the efficiency gain will be outweighed by new consumption, but for most tangible gains some new consumption will be seen. It is fortunate that electricity bills don’t break down the cost of each separate appliance, as then we might see this paradox applying to more areas that are currently less tangible. For example, if your washing machine and dryer became more efficient and cost 50% less to run, you would be more likely to just do laundry each week with a smaller load than a big load two times a month.² Seeing as no one really knows how much it costs to run appliances, and you don't have to hand over money each time you do, the application of Jevons paradox is negligible when we look topically.

Challenges in Studying Jevons Paradox

Studies have validated this, finding that for applications Jevons paradox, or as it's known today, the "rebound effect", is nonexistent. However, these kind of studies only look at direct efficiency and consumption, what we might call a "bottom up" analysis. This is because determining the effect of a given efficiency change is nearly impossible, "because the endlessly ramifying network of interconnections is too complex to yield readily to empirical, mathematics-based analysis." One of the main criticisms of economists or studies is that they oversimplify things, after all, the world is a very complex place and mathematical analysis can only take into account so much. In the case of efficiency improvements this can be particularly detrimental.

As appliances like refrigerators and air conditioners have become more efficient, they have also become more affordable, and their presence and over-use have risen. Refrigerators have become more efficient than the old models, sure, but trends have migrated from having one tiny ice box to having at least one huge refrigerator, but often also a mini-fridge, garage fridge or freezer, and so on. All these efficiency gains, and we are still using far more energy than we did with these appliance's predecessors. Plus, having all this extra refrigerated space leads us to buy much more food than we need, forget about it, and throw it away.

"Since the mid-nineteen-seventies, per-capita food waste in the United States has increased by half, so that we now throw away forty per cent of all the edible food we produce. And when we throw away food we don’t just throw away nutrients; we also throw away the energy we used in keeping it cold as we lost interest in it, as well as the energy that went into growing, harvesting, processing, and transporting it, along with its proportional share of our staggering national consumption of fertilizer, pesticides, irrigation water, packaging, and landfill capacity. According to a 2009 study, more than a quarter of U.S. freshwater use goes into producing food that is later discarded." -The New Yorker

Air conditioning went from being a luxury as a window until to a necessity as central air in all buildings, homes, and cars. Air conditioning for a mid-size vehicle increases fuel use by 20%, according to the National Renewable Energy Laboratory. 

So despite the fact that people may not decide to use their refrigerator more specifically, if the cost of refrigerators goes down due to efficiency increases, they are more likely to acquire more in the long run or buy a bigger model. As such, efficiency gains begat energy use increases. 

“Besides, population growth itself can be a Jevons effect: the more efficient we become, the more people we can sustain; the more people we sustain, the more energy we consume.”

— David Owen, The New Yorker

Some deny that efficiency gains are offset by new consumption. However, the vast majority of data indicates that efficiency advances end up increasing energy use in the long run due to savings. As such, government policies encouraging the manufacture of efficiency are counter-intuitive, and need to either be changed or at least paired with physical caps on energy use through quotas or rationing.

This idea is in direct contradiction with how energy policy is typically gone about today—efficiency rules for cars and emissions are often created, and new products have higher standards to live up to for efficiency. Jevons was very insightful to recognize the effects of efficiency improvements during a time when energy was nowhere near as important as it is today. As much as economists want to believe that all consumers are rational and will consume the same amount when prices decrease, they must recognize that efficiency gains create negative externalities in the form of added consumption. Corrective measures like caps, taxes, and rationing are necessary in order to truly reduce our energy usage, and prevent us from running into the fate envisioned in "The Coal Question". 

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¹Does this remind anyone of today's discussions around oil? 

²Unless you, like me, hate doing laundry. Then you might just spend those savings on food, which is much more important anyway. 

For further reading, I recommend the New Yorker's The Efficiency Dilemna, which is quoted in this article.