The Efficiency Paradox – Is it?

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The recent publication of a book entitled “The Conundrum: How Scientific Innovation Increased Efficiency, and Good Intentions can Make our Energy and Climate Problems Worse”, by David Owen, made me think it might be a good time to re-post a blog that I had originally posted last year. While the book has a much broader focus and offers some specific recommendations, it too seems to still miss the issue that was at the core of my original post.

A few months back, New Yorker magazine ran an “Annals of Environmentalism” article by David Owen titled “The Efficiency Dilemma”, asking the question: “if our machines use less energy, will we just use them more?” The article talked about the so-called Jevons Paradox, named after a 19th century Englishman who argued that, even though England was depleting its coal reserves, making more efficient use of coal would exacerbate the problem, because making coal cheaper would make people use more of it.

This theme was picked up in a recent article in Greentech Media titled “Will Efficiency Lead to More Power Consumption?”

The Agony of DefeatThe New Yorker article talked about the great gains in home appliance efficiency over the past 20 years, a period accompanied by a dramatic increase in home energy consumption. The author pointed out that many economists argue that the Jevons Paradox does not apply to home appliances. However, he then went on to claim that the fact that air conditioning use per household increased by 37% over the same period that air conditioning efficiency improved by 26% demonstrates that greater efficiency does lead to greater use, even in the case of home appliances.

But, there is an enormous fallacy in this argument. Consumers have absolutely no idea of the energy cost of any appliance. They do not get billed on an appliance basis, and would not associate savings with a particular appliance that had gotten more efficient. They might buy more air conditioners if they became less expensive to purchase, but not based on the energy cost. In fact, this is one of the main challenges to the efforts made over the past 20 years to promote a more energy efficient economy (market transformation in industry parlance). Most consumers do not look at the lifetime cost of an appliance; they do not calculate how much more they might save with an energy efficient appliance when purchasing them. Nor do they associate changes in their energy bills – which vary significantly from month to month based on weather and other factors – with the efficiency of specific appliances and decide to buy more.

Let me use a personal experience to expand on this point. I have had a home on Cape Cod, one of the most temperate summer climates in the country, for 20 years. I can count on one hand the number of times I wished that we had central air conditioning. And yet, the vast majority of new higher end homes being built on the Cape have central air. Is that because air conditioners are more energy efficient now than when my house was built in the 1960’s – or because lifestyles and expectations have changed? This same phenomenon is repeating itself in temperate climates around the country. This pattern also holds true for the trend to larger refrigerators; people are not buying them because they are more energy efficient than older ones. In fact, consumers opt for the most energy inefficient units – side by side refrigerators with door through icemakers – because that has become fashionable and is what is being marketed to them.

The bottom line: when people know what things cost they tend to buy more when costs go down. But when it comes to home appliances, whose energy costs consumers do not know – to argue that increasing efficiency will increase usage has absolutely no basis.