Rebound, Backfire, and the Jevons Paradox

© TIM Garrett 2014

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Increasing energy efficiency is the driving force for growing global energy consumption and carbon dioxide emissions -- this sounds like nonsense. Most people would guess the opposite: technological advances enable us to increase energy efficiency and less energy is required to accomplish the same economic task. We don’t need to consume as much oil, gas, and coal in order to maintain the same lifestyle. Practiced globally, the world consumes less and emits less.

However, the issue is generally acknowledged to be a little more subtle. Many economists argue for a weak “rebound effect”. The argument goes that increasing energy productivity spurs fractionally greater emissions further down the road -- not enough to offset the original efficiency gains but enough that the reduction in energy needs isn’t as much as anticipated.

One form of rebound is the “direct” rebound effect. People may choose to drive more often if a vehicle is fuel efficient because driving is useful or pleasurable and now more affordable. There are also “indirect rebound effects”, which extend the response to differing economic sectors. Less money spent on fueling energy efficient vehicles enables more money to be spent on fuel for home air conditioning.

A very few studies have even argued for an extreme form of rebound that is termed “backfire”: gains in energy efficiency ultimately lead to greater energy consumption. The idea is generally derided by economists today but first discussion of the principle came from William Stanley Jevons in 1865. Jevons was emphatic that energy efficient steam engines had accelerated Britain’s consumption of coal. The cost of steam-powered coal extraction became cheaper and, because coal was very useful, more attractive.

Whether it is rebound or backfire, arguments about the magnitude persist because calculation of the total magnitude of rebound or backfire has proved both contentious and elusive. The problem for academics is that any given efficiency improvement has knock-on effects that can eventually propagate through the entire global economy. Calculating the ultimate impact is daunting if not impossible.

To illustrate, imagine that a newly efficient car requires less fuel. An unequivocal good, right? But the associated savings in transportation costs then allows more money to be spent on (for argument’s sake) household heating and cooling. By raising home comfort, workers sleep better. They become more productive where they are employed. Employers then have higher profits, so they proceed to invest in factory expansion leading to greater energy consumption, or reward the workers with raises who then go out and buy a second car or goods produced overseas with coal-generated electricity.

So, in this fashion, the ramifications of any given efficiency action might multiply indefinitely, spreading at a variety of rates throughout the global economy. Barring global analysis over long time scales, conclusions about the magnitude of rebound or backfire may be quantitative but highly uncertain since they are always dependent on the time and spatial scales considered.

Analyzing the global economy

There’s a way around this complexity - simply to ignore it.  Rather than resolving the myriad economic flows within the global economy, a more general approach can be taken by treating the economy only as a whole.

Stepping back like this to simplify the picture is a standard approach in Physics. A nice analogy is to think of describing the growth of a child without being an expert in physiology. There is no question that the human body is incredibly complicated. There is also no question that it is fundamentally simple in that a child uses the material nutrients and potential energy in food not only to produce waste but also to grow its body mass.

As the child grows, it needs to eat more food, accelerating its growth until it reaches adulthood and its growth stabilizes (hopefully!). An inefficient, diseased child who cannot successfully turn food to body mass may become sickly, lose weight, and even die. But a healthy, energy efficient child will continue to grow. Hopefully he will some day become a robust adult who consumes food energy at a much higher rate than he did as an infant. What could be treated as a tremendously complicated problem can also be approached in a fairly straight-forward manner, provided we look at the child as a complete person and not just a complex machine of component body parts.

We can take the same perspective with civilization.  Without a doubt, consuming energy is what allows for all of civilization’s activities and circulations to continue -- without potential energy dissipation nothing in the economy can happen; even our thoughts and choices require energy consumption for electrical signals to cross neural synapses. Like a child, when civilization is efficient it is able to use a fraction of this energy in order to incorporate new raw materials into its structure. Efficiency is what allows civilization’s total size to expand.

But when civilization expands it also increases its ability to access reserves of primary energy and raw materials, provided of course that they remain or are there to be discovered. Increased access to energy reserves allows civilization to sustain its newly added circulations. And, if this efficiency is sustained, it can also expand further. So, in a positive feedback loop, expansion work leads to greater energy inputs and therefore even more work and more rapid expansion.

If civilization’s efficiency is higher, then the expansion rate is faster. For any given amount of energy consumption, civilization is able to accelerate even more rapidly into the reserves of energy and raw materials that it requires. Consumption continues to accelerate as before, but now even faster. As with the child, this is the feedback that is the recipe for emergent growth, not just of civilization but of any system. Doing expansion work efficiently ultimately allows for faster rather than slower rates of energy consumption growth.

Ultimately there are constraints on efficiency and growth from reserve depletion and internal decay. But in the growth phase, efficient conversion of energy to work allows civilization to become both more prosperous and more consumptive.


Implications for climate change

It is easy to find economists willing to express disdain for the concept of backfire, or even rebound, by pointing to counter-examples in economic sectors or nations where energy efficiency gains have led to less energy consumption. For example, the USA has become more efficient and thereby stabilized its rate of energy consumption.

While these counter-examples may be true, they are also very misleading, especially if the subject is climate change. Nations do not exist in economic isolation. Through international trade the world shares and competes for collective resources. Quite plausibly, the only reason the USA appears to consume less energy is that it has outsourced the more energy intensive aspects of its economy to countries like China. Should an economist argue that “There is nothing particularly magical about the macroeconomy, it is merely the sum of all the micro parts” we can be just as dismayed as we would upon hearing a medical practitioner state that “there is nothing particularly magical about the human body, it is merely the sum of all its internal organs”. Connections matter!

Fundamentally, through trade, civilization can be treated as being “well-mixed” over timescales relevant to economic growth. In other words, trade happens quickly compared to global economic growth rates of a couple of percent per year. Similarly, excess atmospheric concentrations of CO2 grow globally at a couple of percent per year. They too are well-mixed over timescales relevant to global warming forecasts because atmospheric circulations quickly connect one part of the atmosphere every other. For the purpose of relating the economy to atmospheric CO2 concentrations, the only thing that matters is global scale emissions by civilization as a whole.

Taking this global perspective with respect to the economy, efficiency gains will do the exact opposite of what efficiency policy advocates claim it will do. If technological changes allow global energy productivity or energy efficiency to increase, then civilization will grow faster into the resources that sustain it. This grows the economy, but it also means that energy consumption and CO2 emissions accelerate.

CO2 emissions can be stabilized despite efficiency gains. But this is possible only if decarbonization occurs as quickly as energy consumption grows. At today’s consumption growth rates, this would require roughly one new nuclear power plant, or equivalent in renewables, to be deployed each day. Barring this, since wealth and energy consumption rates are linked, it can only be through an economic collapse that CO2 emissions rates will decline. If the size of civilization enters a long and profound decline then wealth, energy consumption and CO2 emissions will all decrease at roughly the same rate. Only if the collapse is sufficiently rapid will it be possible to maintain atmospheric CO2 concentrations below levels that are normally considered dangerous.

Perhaps there is a way out of this admittedly grim sounding double-bind. But Jevons’ Paradox tells us that it will not be by way of increasing energy efficiency. Quite the opposite.

For more details

Garrett, T. J., 2012: No way out? The double-bind in seeking global prosperity alongside mitigated climate change, Earth System Dynamics 3, 1-17, doi:10.5194/esd-3-1-2012