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Saturday, 23 February 2008

Does energy efficiency encourage greater consumption?

My initial encounter with the work of Amory Lovins was everything he intended it to be: persuasive, compelling and inspiring. After watching his lectures it just seemed obvious that we should all be taking energy efficiency to the extreme in order to save heaps of money - not to mention the planet.

Googling about for a bit more info and context, though, it wasn't long before I came across some Lovins hatin'. This piece is a prime example. (The one I linked to - not the one you're reading now!) I know very little about the author, Bryce, and would have to agree with him when it comes to what I believe is the false hope in biofuels, but I really took issue with the last part of his essay where he recalls the work of a long-dead Briton:
The final – and most important – area in which Lovins has been consistently wrong is his claim that efficiency lowers energy consumption. And when it comes to arguing the merits of energy efficiency, Lovins’s prime nemesis is a dead guy – William Stanley Jevons – a British economist who in 1865 determined that increased efficiency won’t cut energy use, it will raise it. “It is wholly a confusion of ideas to suppose that the economical use of fuels is equivalent to a diminished consumption. The very contrary is the truth.” And in the 142 years since Jevons put forth that thesis, now commonly known as the Jevons Paradox, he’s yet to be proven wrong.
It shocked and dismayed me at first. Now, after some consideration, I'm convinced that argument is fundamentally flawed when applied to the present day circumstances.

Jevons' postulate is based on at least two assumptions: that the available supply of energy will continue to grow over time, and that demand for the service that the energy provides is also unlimited. Think about the context of the early 1800's for a minute, as the industrial revolution was ramping up.

I'm no economist, but I have a notion that around that point in history the main constraint on economic growth was labour productivity - ie how much raw material could be processed by the human (and I guess animal) workforce. Then suddenly, with the invention of the steam engine, the amount of material which could be processed under the direction of one person dramatically increased. Instead of energy from food being applied through muscle, we had energy from wood, coal and other combustibles being applied through machinery.

I don't know exactly what happened, but it seems reasonable to think that the take-up of the new technology would have initially been constrained by high up-front costs, high ongoing costs in terms of fuel and maintenance and the need to train operators. You can also imagine that due to simple economies of scale - and the seemingly unlimited abundance of fossil fuels waiting to be dug out of the ground - both the up-front and ongoing costs would have trended downwards in reasonably quick time.

As that happened, the unit cost of production fell, making a whole range of goods affordable to people who never could have afforded them in the past. A vast reserve of energy converged with a vast reserve of market demand and the end result is the energy-squandering consumerist culture we have today. Any increase in energy efficiency during the time from then until now would simply have lowered production cost and therefore met with increased demand which in turn increased overall energy consumption.

But I suspect that era is rapidly coming to an end.

For starters, we are now seeing constraints on energy availability every way we turn. Even if it weren't for the fact that we've consumed such a large portion of the planet's fossil fuel stores, the greenhouse effect is imposing a major restriction on our use of what remains. Practical, environmental and security concerns get in the way of a rapid expansion of the nuclear power industry. What's left is a smattering of accessible geothermal resources and true renewables like wind, solar and wave energy. For these reasons, I think that energy availability may become the primary constraint on the economy. Increasing energy-efficiency then becomes a pre-requisite for economic growth... but overall energy consumption will be constrained on the supply side. So the first of Jevons' assumptions is no longer true.

The other assumption - that the market will respond to increases in efficiency by simply using more of the service - is more subtle. Let's have another look at what Bryce had to say:
While it’s true that improvements in energy efficiency on a microeconomic level – like replacing an old inefficient air conditioner with a newer high efficiency one – will cut consumption for that one location, when that same effort is spread over a macro scale the overall energy savings are usually swamped by overall increases in consumption. Thus the installation of more efficient air conditioners across an entire city or state, or country, allows people to use their air conditioners more and, since the cost of cooling suddenly becomes more affordable, more people install air conditioning.
OK, that makes sense. It's probably reasonable to say that humanity will find some way to use all of the available energy and there will also be continuing demand for more. But with energy becoming less available, a balance is likely to be found.

Getting back to Amory Lovins, though, air conditioning is a great point on which to end this post. You see, Lovins doesn't just advocate ongoing marginal improvements to the efficiency of air conditioners and cars. His vision is to design buildings that don't need to use energy to keep them cool, making the air conditioner pretty much obsolete in the process; to make cars which are so light and efficient (while also being roomy, strong and safe) that they can reasonably be powered by solar-generated electricity or a few handfuls of biofuel.

While it's true that our energy supplies are tightening up, the work of guys like Lovins means that there's the opportunity for improving the quality of life by continually learning to do more with less.

1 comment:

Transient said...

My employment is with a port, studying the flows of commodities in and out, and their drivers. One interesting thing I noted was, about 5 years ago, a huge increase in the import of air conditioners, then a drop down closer to, but still above, the long-run average. I also noted that other commodities that I would assume to have the same drivers (furniture, household items, construction items), they did not follow a similar pattern. When I asked some of the older minds about this (I have only had this employment for about 2 years), I'm told that air conditioners had a notable drop in price about this time, and lots of people put them in. Once everyone had one who was likely to want one, the volume imported settled back down.

I don't think the relative inefficiency of air conditioners had much effect on the glut. But I think that, if the energy efficiency of the items was reflected in the price, then we would have seen it effect people's spending.

I was reading Ross Gittins (economic editor of the Sydney Morning Herald, who I heartily recommend for making economics relevant and accessable). He was referring someone talking about taxation. Economists don't much like taxing things like work, because it discourages it. But if our tax system targeted negative things, it would discourage them. Eg - if a can of cola was taxed not for consumption, but for the energy consumed in making it, then we would buy the cheapest cola (or no cola) which would most likely be the one that used the least energy in its manufacture. Thought it was a cool way of thinking.