Energy efficiency has become very popular in recent years. So much so that it’s becoming cool for the truly hip to hold it in disdain.
Case in point: David Owen’s piece in this week’s New Yorker: “The Efficiency Dilemma” (subscription required).
It reads like he’s being contrary just for the sake of being contrary. I don’t want to make a habit of highlighting this type of work, and to do a thorough job of dismantling the piece would take more time and space than I have. But it generated some genuinely interesting conversations in my email this week and I have a hard time letting such poor and frankly lazy reasoning pass without comment.
As a compromise, I’ll try to focus more on the serious issues in the article and less on the serious issues I have with the article itself. Wish me luck.
The focus of the article is something called the Jevons paradox (named after economist William Jevons), or the more common and more broadly defined “rebound effect.” In essence the rebound effect is the fact that as energy efficiency goes up, using energy consuming products becomes less expensive, which in turn leads us to consume more energy.
Jevons’ claim was that this rebound effect would be so large that increasing energy efficiency would not decrease energy use. The rebound effect would eat up all (or more than all) of the energy savings.
To be clear, the rebound effect is real. The theory behind it is sound: Lower the cost of anything and people will use more of it, including the cost of running energy consuming equipment. But as with many economic ideas that are sound theory (like the idea that you can raise government revenues by cutting tax rates), the trick is in knowing how far to take them in reality. (Cutting tax rates from 100% to 50% would certainly raise revenues. Cutting them from 50% to 0% would just as surely lower them.)
The problem with knowing how far to take things like this is that unlike real scientists who can run experiments in a controlled laboratory environment, economists usually have to rely on what we can observe in the real world. Unfortunately, the real world is complicated and trying to disentangle everything that’s going on is very difficult.
Owen cleverly avoids this problem by not trying to disentangle anything.
One supposed example of the Jevons paradox that he points to in the article is air conditioning. Citing a conversation with Stan Cox, author of Losing Our Cool, Owen notes that between 1993 and 2005, air conditioners in the U.S. increased in efficiency by 28%, but by 2005, homes with air conditioning increased their consumption of energy for their air conditioners by 37%.
Owens presents this as clear and obvious proof of a Jevons effect. Case closed.
Here is where Owen gets lazy: A few key facts disprove the point. Facts that are not hard to track down. I write for this blog in my spare time (for free), and I managed to find it without breaking a sweat. I’m not sure why a paid writer for a magazine like The New Yorker couldn’t do the same.
Consider the following:
Real (inflation adjusted) per capita income increased by just over 30% over that time period. All else being equal, when people have more money, they buy more stuff, including cool air.
The average size of new homes increased from 2,095 to 2,438 square feet, over 16%. More square feet means more area to cool and more energy needed to cool it.
In 1993, of homes that had A.C., 38% only had room units while 62% had central air. By 2005, 75% of air conditioned homes had central units. Bigger units covering more rooms means more cool air and, you guessed it, more energy.
(Real electricity prices were mostly flat over this time period, falling by just over 1%, contributing little, if anything, to the increase.)
Finally, even though air conditioners were 28% more efficient in 2005 than in 1993, air conditioners last between 15 and 25 years. Using the mid-range lifespan of 20 years, and assuming that efficiency increased gradually from 1993 to 2005, and accounting for the introduction of new AC units associated with new home construction (about 1.5% of the housing stock in any given year), I calculated the efficiency of the average central air unit in service in 2005 to be about 11.5% more efficient than the average unit in 2009.
Accounting only for the increased income over the timeframe and fixing Owen’s mistake of assuming that every air conditioner in service is new, a few rough calculations point to an increase in energy use for air conditioning of about 30% from 1993 to 2005, despite the gains in efficiency. Taking into account the larger size of new homes and the shift from room to central air units could easily account for the rest.
All of the increase in energy consumption for air conditioning is easily explained by factors completely unrelated to increases in energy efficiency. All of these things would have happened anyway. Without the increases in efficiency, energy consumption would have been much higher.
Worse, and even more transparently wrong, Owen points to the increasing use of air conditioning in the developing world, especially India and China, as evidence of a globally expanding Jevons effect. Never mind the fact that income in China is growing something like three times as fast as in the U.S. and that the cost of air conditioning as a share of average incomes are falling at an even greater rate.
It’s one of the well-established frustrations of the energy efficiency world that people pay too much attention to the up-front cost of goods and not enough to the cost of energy needed use them. More expensive highly-efficient products have a hard time competing. Suddenly, however, Owen wants us to believe that falling up-front prices and rising incomes couldn’t possibly explain the accelerated market penetration of air conditioners in China and that rising efficiency is the reason.
It’s easy to be sucked in by stories like the ones Owen tells. The rebound effect is real and it makes sense. Owen’s anecdotes reinforce that common sense. But it’s not enough to observe that energy use has gone up despite efficiency gains and conclude that the rebound effect makes efficiency efforts a waste of time, as Owen implies. As our per capita income increases, we’ll end up buying more of lots of things, maybe even energy. The question is how much higher would it have been otherwise.
The even more interesting question is whether efficiency growth can ever overpower the effect of income growth and start reducing energy consumption in absolute terms.