Jevons Paradox

Edited by- Jai Kalra

Jevons paradox refers to a form of induced demand wherein efficiency improvements in the use of a resource causes increased consumption of the resource rather than a decrease in its use. It is named after William Jevons, who observed in the 19th century book The Coal Question. He observed that the efficient use of coal made possible by technology actually caused more coal to be extracted and consumed rather than allowing the preservation of existing reserves. Technological progress, in other words, only allows people to satisfy demands that could not be satisfied earlier in the absence of an efficient technology.

Jevons paradox, as currently stated by Owen and others, is really an extreme statement about an effect economists commonly observe called “rebound”: some of the gains from energy efficiency are lost because people’s consumption rises in response to lower prices.

For instance, when the central government requires more fuel-efficient cars, aggregate demand by cars for petrol is less. Prices tend to decline, and lower price motivates a few people to drive a little more than they might have, perhaps taking advantage of the lower prices to take an extra weekend trip.

Jevons paradox claims that, over the very long-term, the rebound effect can dramatically exceed the original gains from energy efficiency. A classic example is lighting, which has gotten vastly cheaper per unit as the world has moved from lamp oil to tallow candles to incandescent bulbs to fluorescent bulbs. Yet people now use more resources for lighting than we ever have in the past, since we have chosen to put lights almost everywhere.

Notice that this argument doesn’t just hold for energy, but really applies to the use of any resource. If humanity is going to feed almost ten billion people in 2050 , and accommodate increases in vegetables, meat and dairy consumption from the rising middle class in places like India and China. This would require us to double our current total production. If we want a future without world hunger, then we will need to get more efficient in how we grow food.

However, Jevons paradox would suggest that in the process of making agriculture more efficient, we will increase total food consumption out of proportion with the increase in production. This means that rather food reaching the bottom of the pyramid it will just become cheaper for the existing consumers. This will stimulate wasteful consumption of these vital resources.

To some this may seem as absurd, but this is exactly what the word has done with electricity. In India, price of energy per unit is at an all-time low, this has been done to make electricity affordable even for the poorest. Not surprisingly the result has been exponential rise in consumption in urban centers. This is what happens when efficiency is increased without omitting fundamental flaws. Efficiency is seen as an unqualified good, a necessary first step toward a more sustainable society.

Energy use by itself is not a bad thing: Indeed, anyone reading this blog online would view the life of hundreds of millions of the world’s poor, living in villages without electricity, as one of extreme deprivation. With food, it’s even more clear: Access to enough food is a basic human right which close to a billion people are denied, although granted, some of us in the developed world (myself included), sometimes eat so much it damages our health.

The issue is not consumption of a resource, but the environmental costs of satisfying demand. In other words, focus on limiting greenhouse-gas pollution or erosion, not on limiting energy or agricultural production.

Jevons paradox suggests a false choice to policymakers: Either make energy production and consumption more efficient, or do something more fundamental. It’s not clear why society can’t work on both options in parallel, especially since empirically, the rebound effect for most technologies over the timescale of decades is much smaller than the original efficiency gain.

I like to call the next few decades “The Great Crunch.” As humanity strives to meet the resource demands of more than 10 billion people, many of them aspiring to live as resource-intense a life as people reading this blog, we will struggle greatly to protect or restore nature and the benefits it supplies us. Efficiency gains buy us time to make our whole economy more sustainable.

The more I confronted the Jevons paradox argument, the more it seemed to be just an excuse to stand back and do nothing. Why should government promote efficiency, ask proponents, when Jevons paradox would imply it’s a wasted effort?

To me they seem like fisherman on a sinking boat who, when the boat begins to take on water, would rather finish the beer they have on board than start bailing: “Pass the beer, boys — nothing to do but enjoy the time we have left.” A very convenient attitude, but a dangerous one to the extent that it distracts people from, say, putting on their lifejackets or trying to build a lifeboat.

#jevonsparadox #angadnayyar