Energy Efficiency and the End of the Free Lunch

By Kennedy Maize

Washington, D.C., March 20 2012 — The most important economist you probably have never heard of is William Stanley Jevons. Contemplating the convergence of coal, industry, and technology in the middle of the 19th Century, Jevons explained why increasing efficient use of coal meant more, not less, use of the dusky diamonds throughout the British economy.

The insights of Jevons, published in his 1865 book “The Coal Question”, came from his examination of how improvements in the use of coal (in steam engines) led to ever greater use of coal. His findings were counterintuitive. Energy efficiency didn’t reduce the use of coal; the amount of coal Britain used increased dramatically.

A century later, the insight of Jevons, informed, perhaps unconsciously, environmentalist Denis Hayes, who helped create the first Earth Day in April 1970, the formative event in the modern environmental movement. As part of the Earth Day enthusiasm, Hayes offered a series of rules for environmentalists. The first was right out of the Jevons playbook: There is no free lunch.

This sensible dictum dominated the thinking of environmentalists for the next several years. Hayes has described the period of 1969 to 1974 as the “golden age” of environmentalism.

The free lunch warning applied broadly, but particularly to energy, which wasn’t much of an issue in 1970 except in the context of cleaning up the smoke from coal-fired power plants. And I can testify from personal experience, having grown up in Pittsburgh, that coal plants in the 1960s and 1970s produced copious amounts of dark, ugly smoke, not just white plumes of steam.

It was clear that cleaning up coal would require everyone to pay a price, in the form of higher electricity rates. There was no free lunch.

Energy use itself wasn’t much of an issue until the 1973 Arab oil embargo. And the price of that lunch was obviously high, so high that it scared the daylights out of our political and policy elites. The Ford administration wasn’t willing to face the political tariff of removing oil price controls; neither were the Democrats who ran Congress.

But in 1976, in an article in Foreign Affairs, an obscure and wonkish low-level academic named Amory Lovins turned that paradigm on its head. A brilliant phrase-maker and publicist, Lovins said the way to accommodate the need to reduce use of energy while not impinging on current or future lifestyles of the people of the world was through energy efficiency. Saving energy (and he later coined the perfect moniker for this: “Negawatts”) said Lovins, is “not a free lunch, but a lunch you’re paid to eat.” Roll over, Jevons.

Since then, the Lovins doctrine has replaced the free lunch dictum. Among others in high places, energy secretary Steven Chu is a devotee in the Lovins school of the reverse free lunch. The U.S., and the world, has gone bonkers for efficiency.

That’s well and good. But the result has not been to reduce energy consumption in the U.S. and the world, but, as Jevons predicted, to increase it. The followers of Jevons have been lurking in the background of the energy policy debate for years, but lately have emerged to set off a worthwhile debate over just how energy efficiency works…and how it doesn’t. Among those who have resurrected Jevons have been the Breakthrough Institute in Oakland, Calif., and energy analyst Rob Bradley at the MasterResource blog. Just this week, the New York Times took up a debate on the limits of energy efficiency.

This year, New Yorker writer David Owen, one of the participants in the debate in the Times, has highlighted the growing controversy over energy efficiency, clearly accepting the lessons of Jevons that saving energy in the short run means using more energy in the long run. His new book is “The Conundrum: How Scientific Innovation, Increased Efficiency, and Good Intentions Can Make Our Energy and Climate Problems Worse.”

Among many illustrations of Owen’s main point is a favorite of environmentalists: Fuel efficiency requirements for cars. He notes that “first fuel-economy regulations for U.S. cars–which were implemented in 1975 in response to the Arab oil embargo of 1973 and 1974 — were followed not by a steady decline in total u.S. motor-fuel consumption but by a long-term rise, as well as by increases in horsepower, curb weight, vehicle miles traveled (up 100 percent since 1980) and car ownership.”

And so it goes as virtually every success in using energy more efficiently has resulted in opportunities to use more energy in more, and more ingenious, ways. The technical term is “rebound.” The practical meaning of the technical term is that Denis Hayes was right and Amory Lovins is wrong. There is no free lunch, and certainly no set of activities that will pay for your lunch…and dessert too. The price of more efficient use of energy is greater use of energy.

The results of this rebound effect are not pernicious. Climbing standards of living around the world — reflected not only in greater material benefits such as cell phones and more cars, but in increased lifespans — are a result of the spread of cheaper energy through the world. The areas of the world that have been left behind — mostly rural and in places such as India, China, southeast Asia, and Africa — can only advance their standards of living through greater access to energy.

So saving energy by using it more efficiently is a good thing, not because it is going to result in less energy but in more. More is better.