Jevons Paradox - Energy Conservation Policy

Energy Conservation Policy

Jevons warned that fuel efficiency gains tend to increase fuel use, but this does not imply that increased fuel efficiency is worthless. Increased fuel efficiency enables greater production and a higher quality of material life. For example, a more efficient steam engine allowed the cheaper transport of goods and people that contributed to the Industrial Revolution. However, if the Khazzoom–Brookes postulate is correct, increased fuel efficiency will not reduce the rate of depletion of fossil fuels.

The Jevons paradox is sometimes used to argue that energy conservation efforts are futile, for example, that more efficient use of oil will lead to increased demand, and will not slow the arrival or the effects of peak oil. This argument is usually presented as a reason not to impose environmental policies, or to increase fuel efficiency (e.g. if cars are more efficient, it will simply lead to more driving). Several points have been raised against this argument. First, in the context of a mature market such as for oil in developed countries, the direct rebound effect is usually small, and so increased fuel efficiency usually reduces resource use, other conditions remaining constant. Second, even if increased efficiency does not reduce the total amount of fuel used, there remain other benefits associated with improved efficiency. For example, increased fuel efficiency may mitigate the price increases, shortages and disruptions in the global economy associated with peak oil. Third, environmental economists have pointed out that fuel use will unambiguously decrease if increased efficiency is coupled with an intervention (e.g. a green tax) that keeps the cost of fuel use the same or higher.

The Jevons paradox indicates that increased efficiency by itself is unlikely to reduce fuel use, and that sustainable energy policy must rely on other types of government interventions. As the Jevons paradox applies only to technological improvements that increase fuel efficiency, the imposition of conservation standards that simultaneously increase costs does not cause an increase in fuel use. To ensure that efficiency enhancing technological improvements reduce fuel use, efficiency gains must be paired with government intervention that reduces demand (e.g., green taxes, a cap and trade programme, or higher fuel taxes). The ecological economists Mathis Wackernagel and William Rees have suggested that any cost savings from efficiency gains be "taxed away or otherwise removed from further economic circulation. Preferably they should be captured for reinvestment in natural capital rehabilitation." By mitigating the economic effects of government interventions designed to promote ecologically sustainable activities, efficiency-improving technological progress may make the imposition of these interventions more palatable, and more likely to be implemented.