The Jevons Paradox and energy efficiency

The Jevons Paradox and energy efficiency

South Africa ranks 13th in the world in total carbon dioxide emissions, with our coal-fired electricity power stations, our wood-burning domestic power and heating supply, and our petrol-guzzling traffic jams the main culprits. What can we do about it? asks VITTORIO BOLLO.

Energy efficiency should be South Africa’s number-one priority with regard to climate change. This I have argued before in this very publication. And this conclusion is a simple one: we rank 13th in the world in total carbon dioxide emissions (in 2008 pumping out 435 878 000 Mt of CO2 to be exact).

Well over 90% of our electricity consumption is CO2 derived from coal-fired power stations, and this particular energy source is the leading contributory factor in global warming, according to the Intergovernmental Panel on Climate Change (IPCC) and other international bodies. Ipso facto, it’s logical that energy efficiency should be this nation’s leading driver in our efforts to minimise global warming and the potentially devastating allied effects of climate change.

But there’s a potential roadblock in this striving to be more energy efficient. Enter the Jevons Paradox. Simply, the Jevons Paradox states that increased efficiency will ultimately (and counter-intuitively, hence the paradox) lead to an increased rate of consumption.

The logic is that when efficiency in the use of a resource is increased, the price drops, leading to a higher quantity demanded. It was the English economist William Stanley Jevons who did the empirical study to prove that technological improvements that led to more efficient use of coal did, in fact, lead to an increased, and not decreased, consumption of coal.

Jevons concluded in his book “A Coal Question” that, contrary to “common intuition”, technological improvements could not actually be relied upon to reduce coal consumption. He concluded, “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth.” Chillingly perhaps, his economic treatise was published in 1865.

Coal was the energy source that was firing the Industrial Revolution of the mid-19th century, much as oil would later be the catalyst for mass industrialisation in the 20th century and to date. James Watt had introduced a coal-fired steam engine, which greatly improved the efficiency of earlier designs.

Dwindling coal reserves were a very real concern for England at that time, but some experts were confident that increasing efficiency in coal use would reduce coal consumption. Jevons disagreed, as he proved that further increases in efficiency would tend to increase the use of coal. He observed that England’s consumption of coal soared after Watt’s innovations made coal a more cost-effective power source, leading to the increased use of the steam engine in a wide range of industries.

Even as the amount of coal required for any particular application or process fell, there was still an exponential increase in total coal consumption. Sound familiar with regard to fossil fuels in the 21st century? Relate that to today’s world: whenever the fuel price drops, the consumption of petrol jumps.

Therefore, it could be justifiably argued that this paradox could apply to the many environmental solutions today that simply improve on energy efficiency as an “endgame”. The common assumption that energy efficiency alone will result in less resource-use could well be fallacious. The critical issue is that of growth. As we continue to live and work in a global economy that is based on perpetual growth, so some of these “sustainable” initiatives could, in fact, and unfortunately, lead to increased resource depletion, not decreased depletion. Therefore, energy efficiency solutions, laudable as they are, can actually fail to be sustainable if they are considered to be the only or primary solutions to the problem. In modern economic jargon this paradox is referred to as the “rebound” effect, or even “backfire”.

There are those that dispute the Jevons Paradox in today’s global economy or argue that this rebound has limited application. In 2000, the journal “Energy Policy” devoted an entire issue to rebound in energy. The editor, Lee Schipper, wrote that the Jevons Paradox has limited applicability today in that, while applicable to 19th Century Britain, it could not be applicable to the more mature, sophisticated economies of today.

Other modern economists have also reached this conclusion. Some of them have argued that modern regulatory mechanisms such as “green taxes” and “cap and trade schemes”, mechanisms unthinkable in Jevons’ day, do much to counterbalance the “rebound” effect of more efficient resource use. The counter-argument is that in trying to avoid higher demand by inflating prices through taxation, one reduces the economic incentive to adopt the new, more efficient technology in the first place. Still, the Jevons Paradox is held to be of limited value by most modern economists and energy analysts.

However, David Owen questioned this assumption in a landmark December 2010 article he wrote entitled “The Efficiency Dilemma” in The New Yorker Magazine, in which he offers contemporary examples of the Jevons Paradox. He cites refrigeration and describes how the progressively declining cost of refrigeration has made “almost all elements of food production more cost-effective and energy-efficient. But there are environmental downsides. Most of the electricity that powers the world’s refrigerators is generated by burning fossil fuel”.

Per capita food waste in the United States has increased by 50% since the 1970s, no doubt owing to this cheaper and more efficient refrigeration. Owen also cites a 2009 study, in which “more than a quarter of US fresh-water use goes into producing food that is later discarded”. He also discusses the improved efficiency of air-conditioners. The US now uses roughly as much electricity to cool buildings as used for all electricity needs in 1955.

“The problem with efficiency gains is that we inevitably reinvest them in additional consumption.” Owen makes a very compelling argument, which I for one find very convincing.

Further evidence that the Jevons Paradox remains very relevant for modern energy issues is provided by Real Clear Energy. It cites a 2008 study done by the Institute for Energy Research that found that, while energy use in the US has become more efficient since the energy crisis of the early 1970s, consumption has kept going up nevertheless. The conclusion is that, “What this illustrates is that improvements in energy efficiency have not reduced our consumption of energy. They have instead improved the way we transform energy consumption into improved living standards.” Very tellingly, the largest surges in consumption were all with fossil fuels or energy that cannot be considered “clean”, namely petroleum, coal, natural gas and nuclear.

And therein lies the crux issue: the Jevons Paradox is really pertinent to energy sources that are either non-renewable (such as fossil fuels) or dubious at best (namely nuclear). The issue of increased consumption due to improved energy efficiency is only a problem when the energy used is fundamentally ecologically unsustainable, as with fossil fuels, or downright potentially catastrophic, as with nuclear (Fukushima, anyone?). It could be argued that increased consumption due to greater energy efficiency when renewable and clean energy is being used should, logically, pose far less ecological, economic and social problems than the like scenario with fossil fuels or nuclear. Increased overall use of renewable energy has to simply be far more sustainable than increased overall use of non-renewable energy.

Therefore, surely an increased overall consumption of clean, constantly renewable energy sources such as solar, wind, wave and geothermal cannot be comparable to the increased overall consumption of non-renewable or undesirable energy based on oil, coal, natural gas or nuclear? If this is not yet another excellent reason why a switch from dirty, non-renewable energy to cleaner, renewable energy is so vitally important, then what is?

South Africa lags horribly behind most other countries in its use of renewable energy. In a 2010 survey using 2006-2009 data from the United Nations and BP in which renewable energy production (namely hydroelectric, wind, biomass, solar and geothermal) was compared between 154 countries, South Africa ranked 147th. Only a pathetic 0,65% of South Africa’s energy was from one of those five renewable energy sources in the survey. That compares to the US at 10,05% renewable energy production, France (13,34%), Germany (16,5%), Brazil (88,88%), Angola (96,45%), Zambia (99,71%) and Iceland (99,99%), not to mention Albania, Lesotho and Paraguay who all have 100% of their energy derived from renewable sources.

It is indeed arguable that hydroelectric power, whilst renewable, has many other environmental impacts, some of them quite devastating. And all energy, even the cleanest, no doubt has residual environmental impacts. But South Africa has to commit far more and far quicker to renewable energy than is the current status quo. Energy efficiency will simply not suffice when so much of our energy remains non-renewable and essentially unsustainable. Until then, the Jevons Paradox will be far more applicable to South Africa’s energy reality than most other countries.

 


Vittorio Bollo achieved an LL B in Law and Politics from a UK university and a Master’s degree in International Environmental Law from a Canadian university. He has over 12 years experience in the SHE field, primarily in consulting, training and R&D. He has recently joined NOSA to work in its growing R&D department, in which he will continue to do work in environmental/SHE risk management and corporate governance, as well as his chief passion, sustainability.

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