Climate Change

The Paradox of Energy Efficiency

How more efficient cars and appliances often lead to more energy use.


Automobile manufacturers have been hard at work, figuring out new technologies to improve fuel efficiency. So why aren't the cars we drive today getting dramatically improved gas mileage? Fuel economy actually increased by 60 percent between 1980 and 2006, but at the same time the average curb weight of vehicles increased 26 percent, while their horsepower rose 107 percent. Consequently, most of the gains in fuel economy have gone into compensating for weight and horsepower. A recent study from Massachusetts Institute of Technology economist Christopher Knittel found that average fuel economy actually rose since 1980 from 23 miles per gallon to only 27 miles per gallon

And 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 vast improvement in lighting technologies, writes Jeffery Tsao from the Sandia National Laboratory and his colleagues, "has been an increase in demand for energy used for lighting that nearly exactly offsets the efficiency gains." They note, "When lighting become cheaper, economic agents become very creative in devising new ways to use it." In fact, they predict that as lighting efficiency improves, say, with LED lighting, over the coming decades that the increased demand for lighting will again likely swamp any gains in energy efficiency.

Another study looked at trends in space heating efficiency [PDF] over the past 50 years in Melbourne, Australia. Modern houses are up to 10 times more energy efficient, yet the study found that modern Australians are collectively using just as much energy to heat their houses. Why? Modern houses are much bigger, people heat larger areas for longer, and fewer people live in each dwelling. The study notes, "The result that per-capita heating consumption has remained remarkably stable over the last 50 years." However, modern Australians are much more comfortable in the winter than their grandparents were. 

Similar results were reported in a 2006 study done for the U.S. Environmental Protection Agency that found that Energy Star homes in Phoenix, Arizona use 12 percent more energy than homes without an Energy Star label. The Energy Star houses actually use 16 percent less energy per square to heat and cool, but on average they are larger than non-Energy Star houses. In other words, people consumed their savings from energy efficiency by buying bigger houses.

These are all examples of the energy rebound effect where increased energy efficiency is offset by increases in energy use because increased fuel efficiency lowers the relative cost of consumption. The magnitude of energy rebound effects has important implications for strategies aimed at restraining climate change through energy conservation requirements. For example, a variety of studies suggest that improvements in energy efficiency could reduce energy consumption enough to cut global carbon dioxide emissions by 2050 by as much as 25 percent.

In a 2007 article in Science, two Princeton University researchers, Robert Socolow and Stephen Pacala, calculated that seven "stabilization wedges" could prevent global carbon dioxide atmospheric concentration from rising to more than twice its pre-industrial level by 2050. "Improvements in efficiency and conservation probably offer the greatest potential to provide wedges," they argued. One wedge (a seventh of necessary reduction) could be achieved by doubling the miles per gallon from 30 to 60 of a fleet of two billion automobiles, or by cutting half the number of miles they travel annually. Another wedge could be achieved by boosting the efficiency of coal-burning electric generation plants from 40 to 60 percent.

Wouldn't such energy efficiency improvements result in rebounds in which consumers demand more energy, perhaps more than the amounts "saved" by increased energy efficiency? This is a highly controversial area of scholarship. Proponents of energy efficiency regulations argue that rebounds are trivial in comparison to the overall reductions in both energy consumption and greenhouse gas emissions. On the other hand, rebound theorists believe that economy-wide demand for relatively cheaper energy can "backfire," ultimately outstripping the efficiency gains. 

A new report, The Rebound Dilemma, for the Institute for Energy Research (IER) by California State University, Fullerton economist Robert Michaels analyzes the implications of depending on energy efficiency improvements to reduce carbon dioxide emissions as a way to mitigate future climate change. Michaels looks at studies of direct, indirect, embedded energy, and economy-wide rebounds. The Melbourne heating case is largely an example of direct rebound effect in which better insulation and more efficient heaters apparently resulted in no reduction of energy use. An indirect rebound occurs when efficiency improvements raise the productivity of other goods and inputs that, in turn, boost the demand for relatively cheaper energy. Embedded energy is the energy used to produce, distribute, and maintain more energy-efficient capital goods. And economy-wide rebounds result from the ways in which people use their savings on energy to purchase other goods and services that also consume energy to produce. For example, cheap gasoline enabled suburban living.

Proponents of energy efficiency [PDF] point to studies of direct rebound effects that often find that they are rather small in comparison to the energy saved by increased efficiency. One classic 1992 study reported a 5 to 15 percent rebound effect for increased automobile fuel efficiency, i.e., people boosted their annual mileage only by that percentage in response to their lower fuel bills with the result that they burned a lot less gasoline. Maybe people aren't driving all that much more, but the new MIT study finds that most of the rebound came from consumer preferences for bigger and more powerful cars.

So what did the IER report find? There are lots of studies of direct rebound effects that look at the effect of more energy efficient appliances on household energy use. The results of the studies vary considerably, but eyeballing the reported results the rebound appears to hover around 30 percent. Assuming an appliance that uses 100 kilowatt hours (kwh) per month to operate is replaced by one that uses just 50 kwh, a 30 percent rebound implies that the actual reduction in energy consumed would be 35 kwh per month. Still not bad at all since the consumer gets the extra services from the new appliance while saving cost of energy.

Indirect rebounds are much harder to calculate. One way to think of them is that whatever a consumer saves from using less energy at home can now be spent on other products and services that themselves consume energy. The money saved from driving a fuel-efficient car may now be spent on flying to a Caribbean beach vacation. Compounding these indirect rebounds throughout the economy can lead to even more energy consumption than that initially saved by introducing energy efficiency measures. The IER study cites the results of 11 econometric models that find economy-wide rebounds ranging from a low of 23 percent to a high 177 percent. Five of the studies report economy-wide rebounds of more than 100 percent. The implication of these studies is that "if energy becomes more productive, history often shows that new energy-using technologies and business models will follow." In other words, the long-run net result is that eventually more energy is consumed than is saved.

The upshot is that energy efficiency mandates advocated by environmental activists with the aim of mitigating future man-made global warming will likely fall far short of their goals. As Michaels concludes, "Instead of imposing energy efficiency mandates, energy policy should embrace market prices and disruptive innovations to guide energy to its most valuable uses." After all, the point of improved energy efficiency is not to forgo its use but to boost its productivity as a way to provide people with more of the goods and services they want.

Science Correspondent Ronald Bailey is the author of Liberation Biology (Prometheus).

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  1. But consumers often take what they “save” through energy effiiciency in one place and “spend” it on more energy intensive products and services elsewhere.


    1. You see? That’s why WE need a VAT!

      1. Soaking mutants in a solution to create super-mutants will solve whatever it is some hippies are calling a problem? Oh, I get it, to get rid of the hippies!

        1. No no no…. he means Vault-Tec Assisted Targeting…. for ease of hippy head-shots

          1. The founder of Vault-Tec didn’t create the PIP-Boy 2000 by himself, he relied on others to do that.

      2. We need a Value Added Tax like we need a home trepanning kit.

    2. It’s a veritable “Peace Dividend”!

      1. Peace Dividend the words that make Keynesians cry in their sleep.

    3. Yes, isn’t it beautiful?

  2. Now the government’s efforts to bankrupt us all make a lot more sense.

  3. There is nothing paradoxical about it. It is called marginal decision making. You will buy more of a good as long as the marginal benefit outweighs cost. Anyone who has taken a good micro economic course should be familiar with this counter intuitive result.

    1. The piss lager drinker paradox, and the answer to the question, ‘if markets are so much better, why do companies like Anheuser-Busch who make mediocre products do so well.’

      1. why do companies like Anheuser-Busch who make mediocre products do so well

        Because some people just want to get drunk as cheaply as possible — which is fine if that is your subjective preference.

        1. Back in college, their products seemed like a perfectly reasonable alternative when money was an object. Not very good, but not total crap. Well, not usually, anyway.

        2. I even went the Keystone route when I was poor, and I was thankful I could get a twelve pack of anything for under six bucks back then.

          Incidentally, likely the best piss lager for making beer battered vegetables.

          1. Black Label, here.

            During my frat/Black Label days, I hadn’t been exposed to good beer, so I didn’t know better. Plus, the whole getting drunk as cheaply as possible thing.

            1. Ye gods, that’s some unpleasant brew. Like Milwaukee’s Beast. Or Meister Blow.

              1. You could get The Beast at the package store in CT for something like $7.80 per 24-bottle case. Then you piled up the cases until the bottle refund amount was enough for another case and returned them and started the cycle again.

                To be honest, back then (before the microbrew explosion) there wasn’t much choice for “good” beer. Sure, Grolsch was better than The Beast, but not enough to pay a lot more for it.

                1. I capitalized on the Stroh’s $5.00 case offer, which was famous in its time.

                  1. Here’s a dude you can hate on. He came to our party with a 12 pack of Strohs and drank nothing but Miller.

                2. You could get The Beast at the package store in CT for something like $7.80 per 24-bottle case. Then you piled up the cases until the bottle refund amount was enough for another case and returned them and started the cycle again

                  Dude. Sustainability!

            2. Black Label, here.

              Try $4 a case. Back in college it was cheap enough to keep a case under the bed for when friends dropped by on Sunday (Sunday liquor sales being illegal at the time).

              It was also the perfect beer for hunting trips. Cook it, freeze it, it always stayed the same.

              Anyone else remember the Carling commercials where there were so many breweries that a guy could reach out of his window and snag a fresh brew from the assembly line?

              … Hobbit

              1. I apparently missed out on the good old days of super cheap beer. But, in my undergraduate days in Minneapolis (about 10 years ago), you could find 30 racks of bottles(!) of Grain Belt (a decent local brew) for something like $12.

          2. I love the Keystone commercials!

          3. Cases? 12-packs? We always bought kegs.

      2. Bud is an inferior good–something that you buy less of as your income grows. Like ramen noodles.

        1. I’m surprised those aren’t marketed together.

        2. Some of us still buy Ramen from time to time just because we like Ramen. Although now adays I usually throw other things into the pot as well.

          1. At the international store there are some really good, exotic varieties.

    2. And yet in this article, the bed-wetters mentioned wanted to increase government theft to prevent people from doing things to enjoy their newfound wealth generated by energy efficiency.

      1. can’t have people enjoying themselves. Not fair that some might have more fun than others.

    3. Well, that rules out most of those who support Team BLUE, because economics is, like, evil, and stuff.

      People before profits!

    1. Not with real cars, they aren’t.

  4. Higher productivity from consumption is a good thing. Consumer demand encourages development of technology with higher productivity so that consumption may be applied to more uses. Fuck product mandates.

  5. So what’s your point, Ronald? Lets not be more efficient with energy? Taken to its illogical extreme, I guess you would say if you want to use less energy, build more gas guzzling cars.
    This is one of those articles that tries to be too smart by half. And of course the solution, as it always is, is to let the free market take care of it. Yeah right. Lets put on the pump the price the rest of the world pays for gasoline. Americans will accept that. Yeah right.
    If you purposely by and energy efficient care because you don’t like your monthly gasoline bill, and then you drive the car even more thus negating the potential savings, then you are an idiot.

    1. Lets put on the pump the price the rest of the world pays for gasoline. Americans will accept that.

      if that pump price is what drivers in Saudi and some other Middle Eastern countries pay, most Americans would be on board with that. If it’s European, not so much. And neither rate has a damn thing to do with the type cars being driven.

    2. Well, Europe taxes the living shit out of gas, so you can’t really call that a market price. And it’s cheap in some oil producing countries.

      Why not give the free market a try? Government intervention and massive regulation have been tried. And haven’t seemed to work very well.

    3. So what’s your point, Ronald?

      Energy abundance is a far worthier goal as it raises the living standards of every human being on the planet, whereas, energy efficiency enforced by regulatory burdens makes us all the poorer due to consumer and productivity choices being stifled.

    4. Jesus Christ, take 10 seconds to proofread if you expect anyone to take you seriously.

      1. *tums music*


        1. Yeah, it’s a sockpuppet, it’s going to purposely post retarded shit so that people engage it.

      2. Yeah, me talk pretty one day!
        Hammered by the hammer….

    5. If you purposely by and energy efficient care because you don’t like your monthly gasoline bill, and then you drive the car even more thus negating the potential savings, then you are an idiot.

      If my rough translation of this into English is correct, no you are an idiot.

      If my energy efficient car enables me to spend less money on commuting for work, I then have more money available for entertainment. This entertainment might include road trips which bring my total spending on gas back to its previous level, but I get more value because of the lower cost per mile.

      1. I could have sworn he was talking about energy efficient health care.

      2. Methinks you overthink. If all, even those engaged in industry, begin to look for fuel efficiency, then even those in the entertainment industry are reducing their consumption.
        But there we go…the typical convoluted thinking pattern of a libertarian.
        But OK you made your point…if one wants to reduce fuel consumption, we all should build and use product that uses the most fuel.
        Yikes. Have fun in fantasyland.

        1. Wut? No. The efficiency can keep going up until the gains spent on your entertainment saturate, and you still end up with a net gain. One can only go to so many movies in a week and take so many road trips in a month. OP’s point wasn’t at all what I think you thought it meant. I haven’t seen anyone condone lowering efficiency, because that would be nonsense.

    6. If you purposely by and energy efficient care because you don’t like your monthly gasoline bill, and then you drive the car even more thus negating the potential savings, then you are an idiot.

      Most people who buy energy-efficient cars because they don’t like their monthly gasoline bill ARE idiots.

      The average American drives around 12,000 miles per year, or 1,000 miles per month. If they have a paid-for old beater getting 20 miles per gallon, that’s 50 gallons of gasoline. At 4 bucks a gallon, their gasoline bill per month is 200 dollars.

      So they go out and buy a 30,000 dollar car that gets 40 miles per gallon, cutting their gasoline bill to 100 dollars, and increasing their car payment from 0 to 500 dollars, for a net loss of 400 dollars per month.

      Really, they’re not buying the new Prius to save money, they’re buying it to show their friends they care about the environment, and to have a nice new car to drive.

      1. You’re assuming it’s a tradeoff between keep current car or buy new energy efficient car. I doubt that represents much of the market. Far more likely it’s a case of having decided to buy a new car, and the question is whether to buy and energy efficient car or a non-energy efficient one. So your analysis needs to be based on savings for the marginal cost getting the energy efficieny vs. the cost of the gas saved.

        As an example, I own a hybrid Mercury Mariner. When I bought it I figured out the cost difference between the hybrid version and the similar equipped gas only version of the car vs. the gas I would save and came out that I’d break even in about 2.5 years. Since I was planning to own the car longer than that, I bought the hybrid. It ended up paying off far faster because gas prices ended up being far higher than I estimated (at the time gas as under $2/gallon and estimated it would average $2.50/gallon over the life of the car).

        1. That’s a decision that makes sense, but I’ve heard plenty of people make the decision I referred to. If they really want to save the environment, why inflict the manufacture and transport of a new car on it? Why not just keep driving the jalopy that already exists?

          1. The entire cash for clunkers program was based around the scenario you wrote above.

        2. Yes, Stormy, you are right on target. Most people are not trading in a no-payment, beat up car. They are at the end of a lease, or simply need a car with little maintenance.
          So the choice is what car do you buy, one with fuel efficiency or one that is not.
          I did the same as you…I fill up my hybrid exactly one-half as much as the sedan I turned in. The hybrid has paid for itself very quickly.
          Unfortunately, many on the blog think simple solutions cannot be right. So the convoluted logic sets in.
          Like in the piece above…fuel efficiency means greater fuel consumption, therefore consume more fuel.

    7. And of course the solution, as it always is, is to let the free market take care of it.

      I like that part.

    8. He is saying that, as usual, government regulations do not have the effect that those who made the regulations intended.

      In this case, it is regulated that cars must get so much MPG, and ACs must meet some efficiency standard, to make the enviro-Marxists happy, but in the end, the energy we save just gets used elsewhere, and doesn’t have any really effect on overall/macro energy use.

  6. If the choice was between tripling the living standards of even the poorest village on the planet, or averting a two degree rise in global temperature and a few centimeters in the sea levels over a hundred year span, who but the most heartless environmentalist, or genocidal of population scare mongers like Paul Ehrlich, would not take the former?

    1. But what about the children in coastal cities who will have to contend with sea water that is an inch higher and temperatures that are two degrees warmer?

    2. Some asshole on the Seattle Times said something about how in North Korea you can’t discuss global warming, but here we let “teabaggers” deny it. I’m like: those people are a half foot shorter than south Koreans due to malnutrition. They don’t give a fuck about global warming,.genius!

      1. That’s what you get for reading the Times, sage.

        1. I get migraines from the stupid, Epi. Why do I bother?

          1. I think you’ve clearly established that you’re a masochist.

            1. I think you’re on to something. My wife smacked me upside the head and said the same thing. I asked her to do it again.

          2. Comments are a riot. I comment there to feel tough. After commenting here for years, you feel like some sort of Kung Fu master around those rubes. Or better yet, it’s like going to Bellevue…

            1. It’s like batting practice against the Mariners.

            2. I’ve hardened myself like Achilles in the river Styx by regularly posting dissent in bastions of reason like HuffPo and The Atlantic.

  7. Gotta love the way getting a higher standard of living for the same amount of energy is regarded as a terrible failure by the enviros.

    1. it just tells a malicious truth about who they are – progressives seek societal regression in living standards, quality of life, etc.

    2. We’re supposed to be returning our energy usage to 1990 levels. Or didn’t you get the memo?

      1. Through centrally planned population reductions or populist war on air conditioners? Inquiring minds want to know!

    3. I wouldn’t expect the greenpeacers to understand these counter intuitive studies when their eyes glaze over at the mere mention of “energy slaves.”

  8. There’s no paradox at all. If callous conservative consumers want to turn their backs on Mother Earth and their fellow humyn beings after our Wise and Frugal Government mandates higher energy efficiencies for all of our daily products, our Elected and Appointed Top Persons can simply mandate maximum housing sizes, maximum vehicle weights and acceleration capabilities, maximum lighting brightnesses, and maximum and minimum allowable housing temperatures.

    1. This might be funny if so many self-described intellectuals didn’t actually believe it. And they do believe it, even in the face of the history of command and control style governments, and how badly they have mauled the environment.

  9. Interesting, but you are overstating the case. Overall MPG did increase, almost 20%, even taking this all into account.

    As far as Melbourne goes, one can imagine that overall home construction rates for a city like Melbourne were a lot higher than many other cities. Further, C02 emissions per capita have gone down, as the author says. Lastly, I bet things have changed a lot since the global housing market burst. Without new, larger homes, but with the technological constant of new efficiencies (“5 Star” (Aus term) heating pumps, “Energy Star” (US term) appliances) means that this will bend, too.

    Somewhat fraudulent.

    1. I forgot to say, they’ve gone down 50%.

    2. JSN: The CO2 reduction was not the result of energy efficiency but switching to natural gas.

  10. Re: Jackoff Ace,

    So what’s your point, Ronald? Lets not be more efficient with energy?

    No, that’s not his point. No amount of intellectual gymnastics can help arrive at that conclusion.

    I guess you would say if you want to use less energy, build more gas guzzling cars.

    Yes. Next question?

    By the way, who said WE want to use less energy? You can go ahead and cuddle inside a cave with synthetic animal skins for cover, for all anybody cares.

    And of course the solution, as it always is, is to let the free market take care of it. […] Lets put on the pump the price the rest of the world pays for gasoline. Americans will accept that. Yeah right.

    The price the rest of the world pays for their gasoline is hardly the free market price. You clearly either don’t know how to thread together sentences logically or you don’t know what the free market is. So either you’re incompetent or ignorant – which one would it be, Jack?

    1. Ah, name calling…the last refuge for grade schoolers and those with no intelligent points to make.
      You proved exactly my point by saying you want to use more energy.
      Have at it…guzzle away.
      Ronald will be proud.

  11. I enjoy when some cloth-grocery-bag using, rainforest-safe latte swilling, Fiji Water buying eco-yuppie starts lecturing his inferiors about the horrible impacts of consumerism, and I point out that his generation is the most wonton wasters of energy the world has ever seen…. namely via their obsession with Portable Gizmos and habit of yapping nonsense 24/7 on facebook.

    Then they get teary eyed and say, ‘well that’s why we need to get off of Oil!!’….

    And I sigh before cockslapping them to death, screaming, “ASSHOLE, Oil is used for TRANSPORTATION!!! Fuck oil!! You mean coal shithead!!~ And it doesnt matter anyway because natural gas is so fucking cheap we’re going ‘greener’ anyway!”

    1. The visual of that was truly hilarious.

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  15. Ronald, thank you for posting this thorough and informative article. I think you really hit the nail on the head in the last sentence, where you describe the key to energy efficiency as being to “boost its productivity.” This is very insightful in the sense that many people tend to think of energy efficiency as eliminating the use of energy altogether. Certain home improvements, such as Triple Pane replacement windows, can help homeowners maximize the amount of energy that their Heating or AC unit uses, by preventing air from escaping or entering your home. Thanks again for the helpful post!

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