Five Percent: Conserve Energy

Climate Change Is Important: Energy Conservation is the First Step


May 20, 2008

The Economist Misses their own Point on Energy Conservation

Category: Climate Change,Conservation,Economics,Little Things,Observations – Tom Harrison – 11:10 am

The Economist recently published an excellent article titled Energy efficiency, The elusive negawatt. Example after example show ways that there is a huge opportunity to take advantage of latent energy efficiencies. The article shows how programs and efforts have been successful at decreasing energy consumption in many effective and profitable ways. It quotes analysts who predict that between 50% to 66% of needed greenhouse gas reductions could be averted through efficiency gains.

But the teaser tells the tale of where the article will end up (hint: not where I would have):
Math Error

If energy conservation both saves money and is good for the planet, why don’t people do more of it?

The answer is found in the final 2 paragraphs:

The culprit is something called the “rebound effect”. Falling demand for electricity or fuel brought on by an efficiency drive should lead to lower prices. But cheaper energy, in turn, is likely to prompt greater consumption, undermining at least some of the original benefits.

And, in a classic example of entirely missing the point of their own article the author states:

[the rebound effect] cancelled out roughly 26% of the gains from energy-efficiency schemes; the other put the figure at 37%. Either way, negawatts are worth pursuing. But they are unlikely to satisfy the world’s thirst for energy to the extent their advocates assume.

What ticks me off here is that the simple last calculation isn’t done.

If the primary effect of conservation through efficiency results in 50% of target greenhouse gas reductions, and the rebound effect reduces that by 37% then conservation should result in 31.5% reduction. If the numbers are 66% primary and 26% rebound then the net would be 48.8% reduction.

Almost as though through clenched teeth and bitten tongue, surrounded by statements that suggest otherwise, the author slips in that “negawatts are worth pursuing”.

Um, yeah. The opportunities don’t require any grand new technology. They don’t require any sacrifice of profits by corporations (quite the contrary) nor do they requires consumers to give up anything (quite the contrary: they are the beneficiaries of the rebound effect!). They are available immediately. Many existing programs show they work. They are obvious and can be simple.

And just so as not to miss the conclusion, perhaps it’s worth emphasizing the numbers:

Energy conservation through efficiency can achieve between 30% and 49% of greenhouse gas reduction targets.

Worth pursuing? Perhaps.

4 Comments

  1. You seem very interested in energy issues. I suggest you read the book ‘Jevons paradox and the myth of resource efficiency improvements’. Efficiency is productivity. Producing more light for less energy is more productive use of energy.

    If you think energy efficiency can save energy, you would also have to believe that improving labor productivity reduces demand for labor – the argument of Marx. Efficiency is the cause of more energy consumption.

    I suggest reading the Encyclopedia of Earth article on the rebound effect, and reading up on the economics of Jevons. It will broaden your views on this topic.

    Comment by Cameron Murray — May 21, 2008 @ 12:13 am

  2. Cameron —

    Thanks for your comment on my post. I appreciate your observations.

    I may not have been as clear as I should have been on my point. I do not think efficiency can “save” energy, as you point out. I believe I understand Jevons’ Paradox (I studied Economics in college).

    However, it seems important to note that Jevons’ Paradox is only an extension of the rebound effect. The “paradox” occurs when the rebound effect is sufficiently large such that the reduction in price (from efficiency, which reduces demand) results in a net increase in consumption.

    However the conclusion of The Economist story is that while the rebound effect is expected to mitigate the initial impact of consumption reduction, the numbers reported suggest that overall consumption would still decrease, significantly. Rebound, yes, paradox, not in this case.

    Why is this?

    Jevons’ observations were published in the early Industrial Revolution when very dramatic increases in efficiency (e.g. Watt’s redesign of the steam engine) resulted in increased consumption. The internal combustion engine (ICE) was another example … one that did result in a reduction in demand for coal and wood fuels because more efficient oil-based fuels were substituted.

    (Note: the main issue in my view is not that we are using too much energy, rather that the kind of energy we are using is producing several very nasty side-effects, like global warming and war.)

    In the early 1900’s, oil and the ICE seemed like a great thing for the environment. Almost off of Britain, and much of the eastern US had been denuded of trees. London and many industrial cities were covered and darkened by the filth of coal dust and smoke. (Notably, clean water powered mills in the Northeast US were viable largely because of these issues).

    One would hope that we now more fully understand the consequences of our use of carbon-based fuels. With luck that the next inventions that alter the way we use energy will be ones that do so in a way less likely to cause the demise of the earth. If new methods of storing and releasing energy are as dramatic as the steam engine or internal combustion engine (or any other numerous technical innovations), the net demand for energy most certainly will increase.

    But until this innovation, we have the opportunity to conserve, whether through increased efficiency of use, through education, or through the internalizing of the externality of carbon emissions, for example via a cap-and-trade system, or just a carbon tax.

    So according to the article, even accounting for the rebound effect, this can result in large near-term net reductions in consumption.

    Tom

    Comment by Tom Harrison — May 21, 2008 @ 9:49 am

  3. Tom, I hope you get this reply. I only found this site searching for another article I had written on rebound effects.

    I guess the only thing I want to raise is that Jevons observations were of rebound effects at their most broad economy wide level. And this is the only level which is important. The authors of the economist article mentioned that rebound effects off-set some of the saving – but the effects they are talking about (direct and indirect only) are only a small component of the total effect. And each of these component effect happens concurrently, so that knowing one component effect is of little use in estimating the scale of the total effect.

    The real argument happening these days os about the causal relationship between energy and resource efficiency, and total energy and resource consumption. Jevons argument more specifically was that the improved productivity of a resource CAUSED the increase in consumption. The current limitations to rebound effect analysis is that not only in the economy wide effect difficult to measure, establishing causality in the models is near impossible.

    If you are interested, there is a free excel workbook by energy economist Harry Saunders available online at http://www.bepress.com/bejeap/topics/vol5/iss1/art15/ which shows how in most cases, under the assumptions of neo-classical economic theory, efficiency gains lead to back-fires – they cause increased consumption.

    Comment by Cameron Murray — September 24, 2008 @ 2:36 am

  4. […] gains are offset by increased consumption. I railed on the conclusions of a 2008 article in The Economist.What I didn’t account for was a local effect, where “local” is, in this case, the […]

    Pingback by Are We Ready to Get Real About Climate Change (again)? | Five Percent: Conserve Energy — November 13, 2012 @ 4:56 pm

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