It is an article of faith within the sustainability movement that resource efficiency improvement must be the main response to Peak Oil and Climate Change. The recurring mantra in our culture is that technological silver bullets will save the day. It is widely believed that increased resource efficiencies coupled with widely deployed renewable energy technologies will rescue the earth from catastrophe and salvage Western civilization from ecological and societal collapse. Furthermore, such a strategy will usher in a new relationship with nature that secures her for generations to come. As with most articles of faith, belief in them is a difficult thing to shake even in the face of compelling evidence to the contrary.
In the early eighties, an old debate within economics resurfaced surrounding something called Jevons' Paradox, or the more descriptive term rebound effect. Many well-known minds, such as Amory Lovins, piped in on the new meaning of this old, obscure argument buried in 19th century classical economics. First coined by the economist W. Stanley Jevons in The Coal Question (1865), the paradox he noted was in regards to coal consumption and efficiency improvements in steam engines: "It is a confusion of ideas to suppose that economical use of fuel is equivalent to diminished consumption. The very contrary is the truth."
In the 1980s, Jevons' observation was revisited by the economists Daniel Khazzoom and Leonard Brookes. In their analysis, they looked beyond the relationship between energy resources and the machines that convert them to useful work to consider the overall effect of technological improvements in resource efficiencies on the energy use of a society as a whole. They argued that increased efficiency paradoxically leads to increased overall energy consumption. In 1992, the economist Harry Saunders dubbed this hypothesis the Khazzoom-Brookes Postulate and showed that it was true under classical growth theory over a wide range of assumptions. Since the appearance of the Khazzoom-Brookes Postulate, numerous studies have weighed in on the debate arguing a range of impacts of the rebound effect.
In January 2008, Earthscan released Jevons Paradox: The Myth of Resource Efficiency Improvements as the latest and most comprehensive review of the Paradox in economics literature. Prefaced by anthropologist Joseph Tainter (The Collapse of Complex Societies, 1988), the book reviews the history of the debate, current findings and includes the latest multi-disciplinary studies regarding the existence of the rebound effect. The book clearly supports the proposition that the rebound effect is present in the US, Europe and most other economies and that strategies to increase energy efficiency in themselves will do little to improve the energy or the ecological situation. In fact, they may well worsen it as the historical impact of resource efficiency improvements shows that increasing the efficiency in the use of a resource in turn increases the consumption of that resource.
The devil is in the details
The crux of the argument lies in the fact that when you save money through improvements in efficiencies, such as with gas mileage or heating costs, invariably that savings has two effects. First, it decreases demand for an energy resource, which reduces the price of the resource. This then reveals a new layer of demand that, in turn, increases consumption of that resource. Such behavior can be found most everywhere...