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).