Perhaps we should try what works

By Blake Alcott, School of Earth and Environment, University of Leeds

The jury is still out on the size of ‘economy-wide’, ‘macro’ or ‘total’ rebound. UKERC and 4CMR for instance hover in the range of 40-52%, albeit with caveats concerning trade effects, bunker fuels and other grave difficulties of definition and methodology. Some still say rebound is insignificant, but they usually mean only ‘direct’ rebound (car-driving, lighting, white goods) and underestimate indirect effects. Still others hold that from the environmental point of view efficiency ‘backfires’, i.e. total rebound is greater than 100%: Even more energy gets used up than in a less efficient economy – dubbed a ‘paradox’ by Jevons in 1865.

Others including myself ignore this paradox and assert that rebound is about 100%, meaning: Whatever energy resources lie fallow after we achieve efficiency increases get immediately consumed for expanding previous or related activities, by the same or marginal consumers.[1] This safely assumes a lot of latent demand given world poverty, population growth and conspicuous consumption. It also assumes a supply function showing profits in the primary energy sector. The first line of evidence for this view is the broad historical picture showing efficiency and consumption rising in lock-step. It seems only isolated individuals take efficiency dividends as more leisure, i.e., as less production in the first place.

A second line of evidence is an analogy: More efficient consumption of labour inputs, starting with the industrial revolution, unleashed a pan-European debate whether this means labour saving, i.e. mass unemployment. In fact labour-efficiency ‘backfired’ hugely, and nobody any longer claims more than some resulting temporary unemployment. Thirdly, many direct rebounds do seem to be greater than 100% – perhaps lighting, pig iron or fertiliser production, or air travel.

In my opinion all this places an initial burden of proof on the position that rebound is significantly lower than 100%. Instead of asking ‘Where’s the rebound?’ we can ask ‘Where are the savings?’

All rebound positions rely heavily on theory.

Consumption increase is not denied, for instance, but it is claimed that without efficiency increases (whether policy-induced or as business-as-usual cost-cutting), it would have increased even more. A bizarre corollary of this, however, is that we would be consuming vastly more energy than we are now had engine efficiency been frozen at the level of Watt’s time.

However, rebound theory and methodology are poorly developed.[2] What, for instance, do direct rebounds, measured to the nearest nano-joule, tell us? Averaging them over the whole world economy doesn’t help us follow indirect effects. There is even confusion over the difference between direct and total rebound, causing online polemical storms as in the case of the Economist’s recent report on lighting. What, moreover, is the value of country or OECD studies without reliable ways to adjust for trade, bunker fuels, developing-world demand curves, etc.?

Further, if we work with prices, income effects and elasticities of demand we must formally recognise that consumer gains in purchasing power mean equal losses in purchasing power for energy sellers – a methodological dead-end. If moreover our model treats GDP and population exogenously, we are begging the all-important question of efficiency’s influence on these two variables. Or, if we work with production functions we must acknowledge the relative rise in demand for a factor that has become more productive (efficient), and that all efficiencies together expand the production possibilities frontier.

These 30-year-old insights have fallen on deaf ears: Short of complete satiation some rebound, to be sure, is uncontested, but theory is too weak to get governments and their intellectual contractors to enter even a modest rebound co-efficient when judging the effectiveness of efficiency policies. An employee of the Swiss Energy Office told me with a straight face that until rebound can be exactly measured it is zero!

How then do we judge efficiency policies – or even state-paid research on efficiency and barriers thereto – in light of this uncertainty? First, is greater efficiency a necessary condition for reduction of depletion and pollution rates? Obviously not: Caps and high environmental taxes reach the goal by definition – efficiency would follow privately, as a matter of course, and be seen for what it is, namely squeezing maximum affluence out of any given amount of a natural resource.

Is greater efficiency a sufficient condition for lower impact? As asserted above, a combination of empirical data and theoretical considerations indicates this is highly unlikely. A multi-disciplinary view from history, psychology, anthropology and economics loudly hint that fallow resources get snapped up

For environmental policy, it seems to me, efficiency is barking up the wrong tree.

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[1] google Polimeni et al., 2008, Jevons Paradox, Earthscan; Herring & Sorrell, 2009, Energy Efficiency, Palgrave Macmillan; Energy Policy journal, Len Brookes.

[2] Madlener, Reinhard, and Blake Alcott, 2009. Energy rebound and economic growth: A review of the main issues and research needs. Energy 34: 370-376.