In economics, the Jevons paradox ( // ; sometimes Jevons effect) occurs when technological progress or government policy increases the efficiency with which a resource is used (reducing the amount necessary for any one use), but the rate of consumption of that resource rises due to increasing demand. The Jevons paradox is perhaps the most widely known paradox in environmental economics. However, governments and environmentalists generally assume that efficiency gains will lower resource consumption, ignoring the possibility of the paradox arising.
In 1865, the English economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal-use led to the increased consumption of coal in a wide range of industries. He argued that, contrary to common intuition, technological progress could not be relied upon to reduce fuel consumption.
The issue has been re-examined by modern economists studying consumption rebound effects from improved energy efficiency. In addition to reducing the amount needed for a given use, improved efficiency also lowers the relative cost of using a resource, which increases the quantity demanded. This counteracts (to some extent) the reduction in use from improved efficiency. Additionally, improved efficiency increases real incomes and accelerates economic growth, further increasing the demand for resources. The Jevons paradox occurs when the effect from increased demand predominates, and improved efficiency increases the speed at which resources are used.
Considerable debate exists about the size of the rebound in energy efficiency and the relevance of the Jevons paradox to energy conservation. Some dismiss the paradox, while others worry that it may be self-defeating to pursue sustainability by increasing energy efficiency.Some environmental economists have proposed that efficiency gains be coupled with conservation policies that keep the cost of use the same (or higher) to avoid the Jevons paradox. Conservation policies that increase cost of use (such as cap and trade or green taxes) can be used to control the rebound effect.
The Jevons paradox was first described by the English economist William Stanley Jevons in his 1865 book The Coal Question . Jevons observed that England's consumption of coal soared after James Watt introduced the Watt steam engine, which greatly improved the efficiency of the coal-fired steam engine from Thomas Newcomen's earlier design. Watt's innovations made coal a more cost-effective power source, leading to the increased use of the steam engine in a wide range of industries. This in turn increased total coal consumption, even as the amount of coal required for any particular application fell. Jevons argued that improvements in fuel efficiency tend to increase (rather than decrease) fuel use, writing: "It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth."
At that time, many in Britain worried that coal reserves were rapidly dwindling, but some experts opined that improving technology would reduce coal consumption. Jevons argued that this view was incorrect, as further increases in efficiency would tend to increase the use of coal. Hence, improving technology would tend to increase the rate at which England's coal deposits were being depleted, and could not be relied upon to solve the problem.
Although Jevons originally focused on the issue of coal, the concept has since been extended to the use of any resource, including, for example, water usageand interpersonal contact. It is perhaps the most widely known paradox in environmental economics.
Economists have observed that consumers tend to travel more when their cars are more fuel efficient, causing a 'rebound' in the demand for fuel.An increase in the efficiency with which a resource (e.g. fuel) is used, causes a decrease in the cost of using that resource when measured in terms of what it can achieve (e.g. travel). Generally speaking, a decrease in the cost (or price) of a good or service will increase the quantity demanded (the law of demand). With a lower cost for travel, consumers will travel more, increasing the demand for fuel. This increase in demand is known as the rebound effect, and it may or may not be large enough to offset the original drop in fuel use from the increased efficiency. The Jevons paradox occurs when the rebound effect is greater than 100%, exceeding the original efficiency gains.
The size of the direct rebound effect is dependent on the price elasticity of demand for the good.In a perfectly competitive market where fuel is the sole input used, if the price of fuel remains constant but efficiency is doubled, the effective price of travel would be halved (twice as much travel can be purchased). If in response, the amount of travel purchased more than doubles (i.e. demand is price elastic), then fuel consumption would increase, and the Jevons paradox would occur. If demand is price inelastic, the amount of travel purchased would less than double, and fuel consumption would decrease. However, goods and services generally use more than one type of input (e.g. fuel, labour, machinery), and other factors besides input cost may also affect price. These factors tend to reduce the rebound effect, making the Jevons paradox less likely to occur.
In the 1980s, economists Daniel Khazzoom and Leonard Brookes revisited the Jevons paradox for the case of society's energy use. Brookes, then chief economist at the UK Atomic Energy Authority, argued that attempts to reduce energy consumption by increasing energy efficiency would simply raise demand for energy in the economy as a whole. Khazzoom focused on the narrower point that the potential for rebound was ignored in mandatory performance standards for domestic appliances being set by the California Energy Commission.
In 1992, the economist Harry Saunders dubbed the hypothesis that improvements in energy efficiency work to increase (rather than decrease) energy consumption the Khazzoom–Brookes postulate, and argued that the hypothesis is broadly supported by neoclassical growth theory (the mainstream economic theory of capital accumulation, technological progress and long-run economic growth). Saunders showed that the Khazzoom–Brookes postulate occurs in the neoclassical growth model under a wide range of assumptions.
According to Saunders, increased energy efficiency tends to increase energy consumption by two means. First, increased energy efficiency makes the use of energy relatively cheaper, thus encouraging increased use (the direct rebound effect). Second, increased energy efficiency increases real incomes and leads to increased economic growth, which pulls up energy use for the whole economy. At the microeconomic level (looking at an individual market), even with the rebound effect, improvements in energy efficiency usually result in reduced energy consumption.That is, the rebound effect is usually less than 100%. However, at the macroeconomic level, more efficient (and hence comparatively cheaper) energy leads to faster economic growth, which increases energy use throughout the economy. Saunders argued that, taking into account both microeconomic and macroeconomic effects, technological progress that improves energy efficiency will tend to increase overall energy use.
A different path which arrives at the same conclusion was pioneered by Garrett, with additional work from Nolthenius[ clarification needed ] ("Generalized Jevons' Paradox") independently of Khazzoom and Brookes, using a more physical thermodynamic approach. Garrett had earlier argued that the value of civilization is not primarily in capital or labor but rather in the networks which engage people to each other and to physical capital, and that these active networks must be constantly furnished with ongoing power in order to retain their function and provide civilization's value. This framework, Garrett argues, identifies energy as the central value imperative for civilization. Garrett further argues that large scale efficient international trade implies that any Jevons' Paradox effects must be evaluated strictly in a closed bounded economic system, hence on a global and not on a national or local level. Garrett showed that on a global level the sum total of all historical global GDP spending ("Wealth") should, from thermodynamic reasoning, be closely correlated to the current rate of global primary energy consumption, and that historical data in fact shows current global primary power consumption is directly proportional to "Wealth" (the Garrett Relation). This relation remains true when non-financial "shadow economy" transactions are included, as Nolthenius argues should be done. The fact that distant past spending enters the Garrett Relation with the same value to today's civilization as does recent spending, argues for the high efficiency of human endeavor to create enduring inflation-adjusted compounded value. Nolthenius argues that the motivational reason is the universal genetic human motivation for growth on individual, local, regional, and global levels, bred by Natural Selection. Combining the Jevons paradox with the Garrett Relation leads to a particularly simple expression for the Generalized Jevons Paradox, or equivalently a re-statement of the Khazzoom–Brookes postulate: Increases in energy efficiency generate savings. History shows all savings are spent, and the Garrett Relation shows that all spending encumbers proportional new ongoing power requirements to maintain the growth it creates against the 2nd law of thermodynamics, while simultaneously raising the ability of the enlarged civilization to access primary energy at a faster rate. These combined effects more than compensate for the lowered energy consumption narrowly and directly caused by the improved energy efficiency, so that total primary energy consumption rates go up, not down. The existence in historical data of the Garrett Relation then argues for the truth of the Khazzoom-Brookes postulate on an explicitly global level, not necessarily on any regional levels.
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Jevons warned that fuel efficiency gains tend to increase fuel use. However, this does not imply that improved fuel efficiency is worthless if the Jevons paradox occurs; higher fuel efficiency enables greater production and a higher material quality of life.For example, a more efficient steam engine allowed the cheaper transport of goods and people that contributed to the Industrial Revolution. Nonetheless, if the Khazzoom–Brookes postulate is correct, increased fuel efficiency, by itself, will not reduce the rate of depletion of fossil fuels.
There is considerable debate about whether the Khazzoom-Brookes Postulate is correct, and of the relevance of the Jevons paradox to energy conservation policy. Most governments, environmentalists and NGOs pursue policies that improve efficiency, holding that these policies will lower resource consumption and reduce environmental problems. Others, including many environmental economists, doubt this 'efficiency strategy' towards sustainability, and worry that efficiency gains may in fact lead to higher production and consumption. They hold that for resource use to fall, efficiency gains should be coupled with other policies that limit resource use.However, other environmental economists point out that, while the Jevons paradox may occur in some situations, the empirical evidence for its widespread applicability is limited.
The Jevons paradox is sometimes used to argue that energy conservation efforts are futile, for example, that more efficient use of oil will lead to increased demand, and will not slow the arrival or the effects of peak oil. This argument is usually presented as a reason not to enact environmental policies or pursue fuel efficiency (e.g. if cars are more efficient, it will simply lead to more driving).Several points have been raised against this argument. First, in the context of a mature market such as for oil in developed countries, the direct rebound effect is usually small, and so increased fuel efficiency usually reduces resource use, other conditions remaining constant. Second, even if increased efficiency does not reduce the total amount of fuel used, there remain other benefits associated with improved efficiency. For example, increased fuel efficiency may mitigate the price increases, shortages and disruptions in the global economy associated with peak oil. Third, environmental economists have pointed out that fuel use will unambiguously decrease if increased efficiency is coupled with an intervention (e.g. a fuel tax) that keeps the cost of fuel use the same or higher.
The Jevons paradox indicates that increased efficiency by itself may not reduce fuel use, and that sustainable energy policy must rely on other types of government interventions as well.As the imposition of conservation standards or other government interventions that increase cost of use do not display the Jevon paradox, they can be used to control the rebound effect. To ensure that efficiency-enhancing technological improvements reduce fuel use, efficiency gains can be paired with government intervention that reduces demand (e.g. green taxes, cap and trade, or higher emissions standards). The ecological economists Mathis Wackernagel and William Rees have suggested that any cost savings from efficiency gains be "taxed away or otherwise removed from further economic circulation. Preferably they should be captured for reinvestment in natural capital rehabilitation." By mitigating the economic effects of government interventions designed to promote ecologically sustainable activities, efficiency-improving technological progress may make the imposition of these interventions more palatable, and more likely to be implemented.
I = PAT is the mathematical notation of a formula put forward to describe the impact of human activity on the environment.
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In energy economics and ecological energetics, energy return on investment (EROI), also sometimes called energy returned on energy invested (ERoEI), is the ratio of the amount of usable energy delivered from a particular energy resource to the amount of energy used to obtain that energy resource.
A steady-state economy is an economy made up of a constant stock of physical wealth (capital) and a constant population size. In effect, such an economy does not grow in the course of time. The term usually refers to the national economy of a particular country, but it is also applicable to the economic system of a city, a region, or the entire world. Early in the history of economic thought, classical economist Adam Smith of the 18th century developed the concept of a stationary state of an economy: Smith believed that any national economy in the world would sooner or later settle in a final state of stationarity.
Energy demand management, also known as demand-side management (DSM) or demand-side response (DSR), is the modification of consumer demand for energy through various methods such as financial incentives and behavioral change through education.
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Eco-sufficiency, or simply sufficiency, refers to the concept or strategy to reduce the environmental footprint of modern societies. The term was popularised by authors such as Thomas Princen, a professor at MIT, in his 2005 book ‘The Logic of Sufficiency’. As a goal, sufficiency is about ensuring that all humans can live a good life without overshooting the ecological limits of the Earth, while at the same time defining what that good life may consist of. Princen argues that ‘seeking enough when more is possible is both intuitive and rational - personally, organizationally and ecologically. And under global ecological constraint, it is ethical.
The Coal Question; An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal Mines is a book that economist William Stanley Jevons wrote in 1865 to explore the implications of Britain's reliance on coal. Given that coal was a finite, non-renewable energy resource, Jevons raised the question of sustainability. "Are we wise," he asked rhetorically, "in allowing the commerce of this country to rise beyond the point at which we can long maintain it?" His central thesis was that the supremacy of the United Kingdom of Great Britain and Ireland over global affairs was transitory, given the finite nature of its primary energy resource. In propounding this thesis, Jevons covered a range of issues central to sustainability, including limits to growth, overpopulation, overshoot, energy return on energy input (EROEI), taxation of energy resources, renewable energy alternatives, and resource peaking—a subject widely discussed today under the rubric of peak oil.
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In the 1980s, the economists Daniel Khazzoom and Leonard Brookes independently put forward ideas about energy consumption and behavior that argue that increased energy efficiency paradoxically tends to lead to increased energy consumption. In 1992, the US economist Harry Saunders dubbed this hypothesis the Khazzoom–Brookes postulate, and showed that it was true under neo-classical growth theory over a wide range of assumptions.
The Green Paradox is the title of a controversial book by German economist, Hans-Werner Sinn, describing the observation that an environmental policy that becomes greener with the passage of time acts like an announced expropriation for the owners of fossil fuel resources, inducing them to accelerate resource extraction and hence to accelerate global warming.
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The Energy efficiency implementation industry branch comprises firms which retrofit or replace inefficient equipment with more efficient parts or equipment, with the goal of reducing energy consumption. Retrofitting enhances existing equipment by making it expend less energy, complete replacement of equipment may be more costly, but can reduce the implementation complexity. The common goal is to save kilowatts (kW) and kilowatt hours (kWh). The difference between these two measurements is that one is a power rating (kW) and the other is a measurement of energy actually consumed (kWh).
Turkey consumes over 6 exajoules of primary energy per year, over 20 megawatt hours (MW/h) per person. 88% of energy is fossil fuels and energy policy includes reducing fossil fuel imports, which are over 20% of import costs and three quarters of the current account deficit. Greenhouse gas emissions by Turkey are about 6 tons/person year, which is more than the global average.
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The Garrett Relation postulates that there exists a fixed relationship between the world inflation-adjusted Gross Domestic Product, accumulated over all of history, and the current rate of global energy consumption. It was first identified in 2009 in a study of the forces controlling the evolution of world carbon dioxide emissions.