There is no need to lose our minds over the Jevons paradox

13th June, 2024

A few years ago, two San Francisco doctors, Mary Mercer and Christopher Peabody, persuaded the busy hospital where they worked to conduct an experiment. They replaced their clunky and inflexible old pagers with a cheaper, more flexible and more powerful system. It’s called WhatsApp.

As the podcast Planet Money reported last year, the pilot was not a success. The chief reason? Messaging became too easy. To interrupt a busy consultant by paging them to demand a return phone call was a serious step, taken with care. But with WhatsApp, why not snap a photograph or even a video message and zip it over just to get a spot of advice? Doctors were soon swamped.

To students of energy economics, this story sounds awfully familiar. It’s the Jevons paradox. William Stanley Jevons was born in 1835 in Liverpool, in a country made rich by a coal-fuelled industrial revolution. He was about to turn 30 when he published the book that made his name as an economist, The Coal Question. Jevons warned that Britain’s coal would soon run out (an eye-catching warning that turned out to be wrong) but, more intriguingly, he warned that energy efficiency was no solution.

“It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption,” he explained. “The very contrary is the truth.”

Imagine developing a more efficient blast furnace, one that would produce more iron for less coal. These more economical furnaces would proliferate. Jevons argued that more iron would be produced, which was a good thing, but the consumption of coal itself would not decline.

Is this right? In a mild form, Jevons’ analysis is certainly correct. When an energy-consuming technology becomes more efficient, we’ll use more of it. Consider light. In the late 1700s, President George Washington calculated that burning a single candle for five hours a night all year would cost him £8. Relative to incomes of the time, that is about $1,000 in today’s money. These fine spermaceti candles were pricey enough to leave even a rich man such as Washington carefully conserving them.

Modern lighting is far more economical and therefore used with abandon. LEDs are many times brighter than candles, and we use much more light and save much less energy than we otherwise could have done.

The stronger form of Jevons’ warning is the full Jevons paradox, when we use so much more of the more efficient technology that we don’t reduce energy consumption at all; in fact, we increase it. David Owen, in a piece for The New Yorker, observed that the refrigeration technology that was once used to cool a cupboard’s worth of food is now used to cool entire buildings.

Ed Conway, author of 2023’s Material World, points to the Sphere in Las Vegas, which has 1.2mn LEDs on its surface. I’m not sure what the lighting bill is for that, but I suspect it would pay for a candle or two.

The stronger Jevons paradox tugs the rug from under the one certainty we have in energy policy, which is that nobody — from Extinction Rebellion to the “Drill, baby, drill!” wing of the Republican party — could possibly be stupid enough to object to cars, houses and appliances that get the same result for less energy and less money.

Has Jevons really ruined all this? No. Owen, normally a wise writer, seems to view the Jevons paradox as something utterly inescapable like the second law of thermodynamics. For example, if an efficient car saves a driver thousands of dollars in fuel costs, Owen explains, “the environment is unlikely to come out ahead, as those dollars will inevitably be spent on goods or activities that involve fuel consumption”.

Yet the environment is all but certain to come out ahead, as there are few more environmentally damaging ways to spend a thousand dollars than to burn a thousand dollars of gasoline. The money could be spent on a thousand dollars’ worth of coal, I suppose, but it could also be spent on a thousand dollars’ worth of tree saplings or yoga lessons.

Thankfully we can refute the strong paradox. In my lifetime, energy consumption per person in the UK has fallen by one-third, while carbon dioxide emissions per person have fallen by nearly 60 per cent. As Hannah Ritchie explains in her book Not the End of the World, while some of this fall reflects the offshoring of manufacturing to other countries, most of it does not. Energy efficiency really has reduced energy consumption.

Jevons is worth taking seriously. When we regulate to require energy efficiency, consumption will fall less than pure arithmetic suggests. So energy policy should always be considering other instruments — including the old favourite of economists, a carbon tax, which is a Jevons-proof way to discourage the burning of fossil fuels.

But let’s not let Jevons drag us into despair. We really are moving towards a cleaner world, and energy efficiency has a big part to play in that move.

One place where the Jevons paradox seems inescapable? My inbox. It is so much more efficient to reply to a digital message than to a handwritten letter, yet somehow I am drowning in emails.

Written for and first published in the Financial Times on 17 May 2024.

Loyal readers might enjoy the book that started it all, The Undercover Economist.

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