Bouncebackability: Is there still truth in the Jevons Paradox?

Despite its uninspiring name, energy efficiency is set to take pride of place in upcoming European energy policy. On a simple level it makes perfect sense: we can use less energy to do the same job, pay less money doing so, and pump fewer resultant emissions into the atmosphere. Win, win, win - right?

However, there are some doubts over the extent to which energy efficiency actually ‘works’. If gas prices fall through falling demand, for example, do we turn up the heating now that cost is less of a burden? And how much of the cash saved on the back of more efficient home appliances do we spend on other goods and services which, in turn, take energy to produce?

The opening shot of this debate went off over 150 years ago with the Jevons paradox.

During the Industrial Revolution, Scottish economist William Stanley Jevons noted that a jump in steam engine efficiency led to a surge in coal use, as the machines became more affordable: 'elementary economics', says a prominent energy economist.

This runs contrary to the simple mantra of energy efficiency, that by making a process more efficient we use less energy.

Over time, however, this position has weakened. Basically, energy demand elasticity - the extent to which energy use increases as its price falls - has decreased, especially in developed nations. Now, much of the discussion focuses on the rebound effect – the difference between forecast savings through efficiency and those realised – rather than the ‘overshoot’ noted by Jevons.

Small bounce, if any

This rebound can arise through a couple of channels. The first is offsetting energy savings by using more – leaving lights on as the cost of doing so falls, or driving more as petrol becomes cheaper. This is known as the direct rebound effect.

The second form, known as the income effect, is much harder to pin down accurately. It is based on the premise that a fall in energy expenditure is equivalent to an increase in real income, giving us more cash to spend on other goods and services, many of which have their own energy footprint.

Taking lightbulbs as an example: if it were really true that the lower running costs of new, efficient bulbs meant we were keeping lights on all hours, the decline in lighting sector energy use shown here would not be observed.

The fact that we do see this overall shrinkage in lighting sector energy use means that here, the rebound effect is not significant.

This is not simply a phenomenon in lighting. UK electricity demand has fallen by 17% since 2008, with gas use down 24%, despite a proliferation in the number of (increasingly efficient) devices in our homes and an increasing population. Overall, UK households now use nearly a third less energy than they did in 1970.

Wealth gap

In nations such as the UK, where there is less of a pent-up demand for energy than in developing countries, this ‘de-linking’ between price and demand is increasingly common.