The Conundrum – by David Owen (Jevons' "rebound effect" enters the New Yorker mainstream)

By Josiah Neeley -- May 2, 2012

Whether it is a new fuel efficiency standard for cars, bans on incandescent light-bulbs, or those commercials touting businesses’ commitment to lowering their carbon footprint, the idea that we can reduce carbon emissions by using energy more efficiently is a mantra of our age.

In fact, energy efficiency is considered to be so important that it is sometimes said to be a “fifth fuel” along with coal, petroleum, nuclear, and “alternative” energy. And who can forget Amory Lovins’s term negawatt in this regard?

But as New Yorker staff writer David Owen details in his new book The Conundrum, the idea that we can reduce our energy use by buying the right products is based on flawed economic reasoning.

Background

Improving efficiency and related conservation are not unique to energy but all resources. They are part of the natural, self-interested capitalist process. Resource economist Erich Zimmermann noted back in 1933:

Today the conservation movement is led by sober business men and is based on the cold calculations of the engineers. Conservation, no longer viewed as a political issue, has become a business proposition…. The old school looked on conservation as a governmental function; the new school believes in entrusting it to the hands of business men and engineers.

The energy conservation movement of our era begin during the 1970s energy crisis, when oil and natural gas price controls in the United States spawned the energy crisis. [1] Since then, energy efficiency has had a life of its own in the public discourse and in government capitals.

The goal, really quixotic dream, was to somehow turn turn less energy usage per application into reduced overall consumption.

With active government conservation policy, it is difficult to untangle natural increasing market efficiency (or conservation) from government conservationism.  But government or not, there is an  inconvenient truth: increasing efficiency on the micro level does not necessarily reduce total usage–and might even promote overall energy consumption by improving mass affordability.

Rebound Effect

This fact, improvements in energy efficiency can lead to more energy consumption, known in the economics literature as the rebound effect, is central to Owen’s book.

At first, the rebound effect (also called the take-back effect) might seem paradoxical. After all, increased energy efficiency means you can do more with less. A car that gets 30 miles to a gallon can travel twice as far being fill-ups as a car getting 15 miles to the gallon.

What this leaves out, though, is that making something more energy efficient also tends to make it cheaper. And when something gets cheaper, people will do more of it. If the fuel efficiency of a car increases, the cost of driving goes down, so people will respond by driving more.

This is only the beginning of the problem. To the extent that drivers don’t respond to lower gas bills by driving more, they still will have the extra money in their pocket. That money is going to be spent on something, and given the nature of the modern economy, chances are that something is going to involve carbon emissions.

As Owen puts it “even if drivers don’t spend their savings on more driving they will certainly spend them on goods or activities that involve energy consumption in some other form,” unless, that is, “those drivers shred the money and add it to a compost heap.” In fact, in some cases the rebound effect can be so large as to more than cancel out any energy savings from the original efficiency.

The rebound effect is not a new idea. William Stanley Jevons describes the concept in his 1865 work, The Coal Question . And nodding to history, two of the chapters in Owen’s book are titled “William Stanley Jevons” and “The Coal Question”.

Restatements

In the 1970s, British economist Len Brookes applied the same idea to proposals to use increased efficiency as a means of dealing with the oil crisis. And recently the Breakthrough Institute released a report concluding that the rebound effect “undermines the ability of below-cost energy efficiency measures to reduce total energy consumption or related greenhouse gas emissions.”

Of course, the fact that energy efficiency doesn’t reduce energy use hardly makes it a bad thing. Increased efficiency, getting more from less, is the foundation of modern prosperity. But it does mean efficiency isn’t a good candidate for reducing a society’s carbon footprint, at least on its own.

Owen’s embrace of the rebound effect leads him to some atypical conclusions for an environmentalist. Big cities are good, because they involve less living space and fewer emissions per person. Organic farming is not green, as it “encourages deforestation and ‘agricultural sprawl.’” Solar power likewise promote sprawl, and destroy landscapes.

Owen even flirts with the idea of mandating energy inefficiency as a means of reducing energy use, speaking wistfully of hand-crank cell phones and describing the ideal green car as having “no air conditioner, no heater, no radio, unpadded seats, open passenger compartment, top speed of twenty-five miles an hour, fuel economy of five or ten miles a gallon. You’d be able to get your child to the emergency room, but you’d never run over to Walmart for a bag of potato chips, and you’d take public transportation to work.”

As with Jevons, the rebound effect leads Owen in a pessimistic direction. For Jevons, this pessimism took the form over concerns that the West would soon run out of coal. Owen, by contrast, sees the likelihood that we will not run out of fossil fuels anytime soon as the real problem. If energy efficiency won’t reduce carbon emissions, then we seem to be left with two unappealing options: less prosperity or fewer people.

Owen somewhat gingerly broaches the topic of population control, noting that “population control has largely been a forbidden topic in the United States,” and that China’s one child policy “is cited far more often as proof that population control is disastrous than as proof that it’s achievable.” He is more expansive on reducing consumption, though he admits that the results of this – “halted growth,” “forgone consumption,” “reduced mobility” – are not likely to be popular either. “How appealing would ‘green’ seem if it meant less innovation and fewer cool gadgets – not more?” Not very.

Conclusion

Energy use is so central to modern life, and to the freedom and prosperity that go with it, that it’s hard to see how people could ever be convinced to give it up voluntarily. At one point Owen recommends Googling satellite photos of the earth at night, to see the extent of light pollution. Anyone who did so might note that there is one country that has bucked the trend of widespread use of electrical lighting: the Democratic People’s Republic of Korea.

Clearly Owen does not want the world to be one giant North Korea. But it’s hard to see how the massive emissions reductions he thinks are necessary can be achieved without moving somewhat in that direction, particularly if increased efficiency is off the table. This is the real conundrum of Owen’s insightful but ultimately unsatisfying book.

[1] Price controls created oil shortages in the U.S. before the Arab Embargo, and natural gas shortages were not OPEC-related.

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Josiah Neeley is a policy analyst at the Armstrong Center for Energy & the Environment, Texas Public Policy Foundation.