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Fuel Efficiency Paradox (aka Jevons Paradox)

Posted by Mark Motive on February 18, 2010 Green, Mark's Blog, Peak Oil Watch Add comments
Feb 182010
If you become more efficient at your job, do you go home early? No. You produce more output using the same amount of time.

The same goes for energy.

Here’s something to consider when we’re being bombarded with PSAs on energy efficiency. The following shows why better efficiency may not reduce consumption of energy.

Increased energy efficiency can have two outcomes within an economy:

1. The economy uses the same amount of energy, but at a lower cost.
2. The economy uses more energy, but at the same cost.

In a system with competing economies, businesses and individuals, outcome 2 is more likely.

Why?

Since energy usage drives economic growth, which is tied to corporate, political and military power, economic participants that are able to use more energy at the same cost will grow and become rich and powerful. On the other hand, economic participants that choose to use the same amount of energy at a lower cost will fall behind.

One can view oil as a form of capital, and energy efficiency as a return on capital. Greater energy efficiency is equivalent to a greater return on capital. As the return on capital increases, so too does the demand for capital.

Alternatively, one can also view energy efficiency as an energy subsidy. When something is subsidized, people tend to consume more of it. [In fact, energy subsidies are a growing problem in many OPEC countries where oil revenues are used to subsidize the cost of fuel. This has resulted in rampant energy use in these countries, and domestic OPEC consumption is increasingly competing with oil exports to America, Europe, China, etc.]

Greater energy efficiency leads to greater energy consumption…evidence?

Look at the US since the 1970s. Automobile fuel efficiency has increased dramatically, but this has not resulted in less fuel consumption. Instead, it has enabled greater consumption through economic growth and ‘innovation’:

- There are 130 million more drivers on the road in the United States today vs 1970
- 2 and 3 car families have increased
- Annual miles driven per person is now about 12,000 vs 9,500 in 1970
- There are more energy-consuming features in cars (e.g. air conditioning, on-board computers)

So, improvements in fuel efficiency resulted in more cars and greater car usage. This contributes to greenhouse gasses and speeds up the depletion of scarce resources.

So how do we reduce energy consumption, assuming that is the goal?

We make oil and gas more expensive and develop cheap, efficient alternatives that don’t simply make it easier to consume traditional fossil fuels. That means solar, wind, hydro and geothermal are the answer.

Bottom Line for Investors:
1. Solar, geothermal, hydro, wind have huge potential over the next several years.
2. High oil prices will be the ‘cure’ that weans people off depleting oil resources.
3. As long as ‘efficiency’ (e.g. hybrid vehicles) is sought as a goal, rare earth metals provide a opportunity to to invest, as they are scarce and required to produce batteries.


  • http://www.selfdestructivebastards.com/ Chris Lawrence

    Jevons Paradox is an accurate description of our history since the Industrial Revolution, but it’s not a physical law. It has only happened because our primary goal has been economic growth. If our goal was sustainability instead, then efficiency could indeed be helpful in reducing total energy use.

    http://www.selfdestructivebastards.com/2010/02/energy-efficiency.html

  • Kurt

    Jevons Paradox also assumes the cost of energy is fixed. During the 70′s when energy prices increased, we had to improve efficiency just to get the same amount of work done at the same cost. After 1982 when energy prices started to decline, we used that efficiency to increase output.

    Using cars as an example, you can now purchase a 250HP car that gets the same or better mileage as a 150HP car 30 years ago. When gas prices increase, auto manufacturers should be able to use the efficiency knowlege they’ve gained over the past 30 years to produce 150HP cars that get much higher mileage.

  • Plan B Economics

    Can we slow the rate of oil depletion through better fuel efficiencies?

  • DC

    q/ “So, improvements in fuel efficiency resulted in more cars and greater car usage”

    One hears this argument made often. But it strikes me as wrong in a very fundamental way. Notice the subtle deflection, corporate greed, massive marketing campaigns designed to elevate the car to the supreme status symbol, massive public subsidies designed to make our cities completely car-dependant. None of those factors, apparently, are to blame. “Efficency” is the real culprit here, not us, as individuals, or corporate greed and government neglect. Jevons has little, if anything to do with the massive explosion of car-dependency. Unchecked population expansion and misguided public policy has done the trick just fine. There would still be 130 million more drivers on the road, even if cars were “less-efficent”. Car dependency came about through a complex web of historical and economic events, not, as this article implies, higher-milage cars.

    People will simply buy whatever the consumer\industrial system puts in front of them and tells them they “need”. This can be marignally more efficent, ie “hybrids”, or it can be a huge waste of energy and materials, ie “hummers”. At least point #2 gets it correct, fuel has to be made so expensive that not even “efficency” is seen as a viable solution. Makeing gas-powered mobile trash-bins mariginally more efficent(the current strategy) is a huge mis-direction of resources we need for other critical tasks.

    As to the question above, can peak oil be averterd, or delayed through efficency? At this point, I would have to say, no, it cant. Not to any real degree. HE vehicles, say, 60mpg or higher would have been a great idea…….50 years ago. At this point it is too late, the damage has allready been done. Trying to stretch out a fundamentally flawed system like ours for a few more years is simply foolish. At this moment in history, we are in not-ideal situation. Higher efficency, is too litte, too late, but the alternative, BAU, is also, of course , not viable either.

  • Plan B Economics

    “gas-powered mobile trash-bins”

    Classic line!

    I wouldn’t go as far to say that the paradox has little to nothing to do with the explosive use of cars. Affordability is important, and efficiency is a form of affordability. However, I agree that there are many additional forces pushing the car culture – one only has to look at city planning in LA to see this.

  • Harquebus

    Until the second law of thermodynamics is disproved, wind and solar have got no potential whatsoever. It takes more energy to collect wind and solar than you get back.

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