NCPA - National Center for Policy Analysis

The Paradox of Energy Efficiency

July 27, 2012

A thorough understanding of the so-called rebound effect is essential for the formulation of energy policy. The rebound effect occurs where increased energy efficiency is offset by increases in energy use due to a lower cost of consumption. The magnitude of energy rebound effects has important implications for strategies aimed at enacting energy conservation requirements, says Ronald Bailey, Reason Magazine's science correspondent.

A crucial example of the rebound effects exists in the automobile industry, where manufacturers have worked for decades to create more efficient vehicles with superior mileage.

  • Fuel economy increased by 60 percent between 1980 and 2006.
  • During that same time period, however, the average curb weight of vehicles increased 26 percent while horsepower rose 107 percent.
  • Consequently, most of the gains in fuel economy have gone into compensating for weight and horsepower.
  • A study from Massachusetts Institute of Technology economist Christopher Knittel found that average fuel economy has only risen from 23 miles per gallon to 27 miles per gallon since 1980.

Further, cars aren't the only place where greater efficiency has failed to translate to reduced consumption.

  • Looking at even longer time scales, lighting efficiency has improved by more than many thousand-fold from sputtering candles to modern LEDs over the past three centuries.
  • The result of this, however, is an increased consumption of lighting that, by some estimates, entirely erases the gains in efficiency that were realized over those centuries.
  • A similar effect has been measured in household heating and cooling: while systems have become more efficient over time, their enhanced performance has been offset by the adoption of larger dwellings.

Informed minds disagree on exactly what the rebound effect is (what percentage of efficiency gains are erased by rational changes in consumption), but some estimates have placed the figure at above 100 percent. That is to say, efficiency gains, while enabling an improved quality of life, do little if anything to reduce mankind's impact on the world.

This understanding is essential for the creation of informed energy regulations because it demonstrates that their goals are often self-defeating. Governmental support for a blind rush to improve efficiency will likely prove counterproductive or, at the very least, yield results that are consistently disappointing.

Source: Ronald Bailey, "The Paradox of Energy Efficiency," Reason Magazine, July 17, 2012.

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