Economics, Energy and the Environment

The Paradox of Efficiency

It is common to hear proponents of the new green energy economy talk about a huge potential for efficiency gains to reduce demand for energy. New efficiency standards for appliances, cars, and just about everything else will magically allow our economy to grow without growing our energy consumption.

Mr. Wizard, meet Mr. Jevons. The Jevons paradox, sometimes known as the rebound effect, is the entirely predictable result of genuinely improving efficiency: when you lower costs of something, people consume more. Jevons observed that more efficient ways of consuming coal led to increased coal consumption. Others have observed that the 1970s fuel-economy standards led to increased driving.

Now we see the Jevons paradox as it relates to the new green vehicles that governments are pushing with lavish subsidies, tax credits, and more. As blogger Zach Bowman points out at AutoBlogGreen,

Sweden seems to be experiencing what experts call a backfire effect from the company’s rash of green car sales. Swedish car buyers have been snapping up clean diesel and ethanol vehicles in droves thanks to sizable government incentives, but, according to reports, the nation has actually seen its emissions from the transportation sector increase by an impressive 100,000 tons. What happened?

According to statistics from the Swedish Transportation Agency, average emissions from new cars in the country decreased from 164 to 151 grams of CO2 per kilometer driven, and Swedish drivers used their green cars to cover more territory than ever before. Thanks in part to better fuel economy and the idea that a green vehicle has a slimmer impact on the environment, the overall result is more fuel burned, more emissions spewed.

Environmentalists would have us believe that somehow, the Jevons paradox doesn’t apply to them. Nothing could be further from the truth: as the guys over at the Breakthrough Institute point out, “There is a large expert consensus and strong evidence that below-cost energy efficiency measures drive a rebound in energy consumption that erodes much and in some cases all of the expected energy savings.”

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