Jevons' Paradox

Jevons' Paradox

Jevons’ Paradox has repeatedly shown us what happens when a resource becomes cheaper. We just use more of it, eliminating the positive effects of reducing its cost.

A Bit About Mr. Jevons

William Stanley Jevons (1835–1882) was an English economist and logician. He is one of the key figures in the "marginal revolution," which revolutionized economic theory and marked the shift from classical to neoclassical economics. He was hugely influential in the development of empirical methods, along with the use of statistics and econometrics in the social sciences.

After spending two years at University College London, Jevons accepted a post as assayer for a new mint in Sydney, Australia, which he held for five years. There, he developed an interest in political economy and social studies. He returned to England in 1859 to continue his studies at University College London, where he earned a Bachelor's and a Master's degree.

His two seminal works were "General Mathematical Theory of Political Economy" (1862) and "A Serious Fall in the Value of Gold" (1863). The former introduced what later became the marginal utility theory of value, which states the utility, or value, of each additional unit of a product—also known as its marginal utility—is less and less to the consumer.

In the late 19th century, people began debating how the depletion of cheap coal might threaten England's prosperity. At the time, the source of England's wealth was coal, which powered the rapid growth of energy-demanding devices and infrastructure. People worried about scarcity for the first time, but assured themselves that the increasing efficiency of coal use would prevent this precious but limited resource from running out.

Jevons entered this debate with the publication of his book The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal-Mines in 1865 (the Victorians had a real thing for inordinately long book titles—today, he might have titled it "Coal is Running OUT, People!").

Jevons observed that the increasing efficiency in the use of coal was leading to an increase in the consumption of coal in many industries. He theorized that technological progress leading to increased efficiency would not reduce fuel consumption, contradicting simple intuition. In his words: "It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth" (the Victorians were also fans of using 1,000 words where 10 would suffice).

Jevons' prediction, which would later be known as Jevons' Paradox, states that as energy converters (e.g., vehicles, lightbulbs, other electrical appliances, etc.) become more efficient, and the cost of using them falls, this decrease in cost will, in turn, result in increased usage. And this increased usage often overwhelms any resource-conservation gains that might have been reaped from increased efficiencies.

In other words, any emissions savings from increased efficiency will be outstripped by increased demand as a result of this heightened efficiency.

This effect is commonly referred to as a "rebound"—or, when the rise in consumption actually exceeds energy savings, as a “backfire.” They are due to consumers and producers taking advantage of cheaper energy and using more of it: if electric vehicles become much cheaper (and electricity itself becomes both renewable and cheaper), we might drive more, and more people might drive, resulting in an increase in fuel consumption.

This effect isn't limited to energy use, either—implementing more efficient irrigation systems in agriculture also results in a rise in demand for water. The total rebound averaged across all sectors is 31.5 percent, meaning that, on average, demand increases by 31.5 percent as a result of efficiency savings.

Why do we care?

The concept of efficiency-without-limit has been used to green-light endless growth: efficiency has represented the only remedy for the resource depletion that it entails.

Efficiency has also been dubbed the "fifth fuel," after coal, petroleum, nuclear power, and renewables; it has been considered a means for building a green economy and preventing economic growth from causing detrimental harm to the environment and human health. In 2007, the United Nations Foundation noted that increases in efficiency constituted "the largest, the most evenly geographically distributed, and least expensive energy resource."

Source: EIA, public domain

Efficiency has long been touted as a solution to humans' growing energy demands—efforts to decouple gross domestic product (GDP) growth from energy consumption rely on energy efficiency as the main factor in reducing energy intensity. Jevons' Paradox, however, exposes the flaws in this strategy: relying solely on efficiency gains will not reduce our energy consumption and might, on the contrary, increase it.

While efforts to transition from fossil fuels to renewable energy are necessary, we cannot allow ever-dropping prices of green energy to delude us into thinking that cheap renewables are all we need for a sustainable future and that this new energy source can support currently unsustainable patterns of consumption.

Quite apart from the paradox, any renewable sources, such as solar and wind, are not actually 100 percent "green"—they rely on rare earth metals that are often difficult to find in sizable deposits and must be extracted, sometimes in incredibly environmentally destructive ways.

In fact, almost every renewable energy source requires non-renewable minerals that are difficult to access, like indium, neodymium and lithium; they all also require kilotons of other metals like steel and copper. As the demand for renewable energy increases, so too does the demand for the materials required to meet this demand.

Land-use requirements of renewable energy. Source: Amasia, based on data from
Land-use requirements of renewable energy. Source: Amasia, based on data from John Van Zalk and Paul Behrens and analysis by Bloomberg Green

That's not all — renewable energy has other limitations, too, and land use is one of them. On a per-watt basis, renewable energy plants like wind and solar farms require more space than their fossil fuel counterparts. For instance, while a 200-megawatt natural gas power plant could fit on a single city block, a wind farm of the same generating capacity would have to be spread over 13 square miles. Land-use constraints are a significant factor when considering the potential of clean energy in the fight against climate change.

Additionally, the rapid development of renewable energy facilities is increasingly overlapping with conservation areas in parts of the world such as Southeast Asia, a vital region for biodiversity. Biodiversity conservation plays its own important role in the fight against the climate crisis; we should not have to compromise it for renewable energy expansion if doing so is avoidable.

Am I saying we don't need cheap renewable energy?

Of course not. This doesn't mean that we should slow down or abandon efforts to transition towards clean energy. There is still immense value in doing so: renewable energy is cost-effective, inexhaustible, and doesn't generate greenhouse gas emissions, among other benefits. It is the obvious choice when presented alongside much dirtier, more pollutive alternatives like fossil fuels.

But renewable energy is not a magic wand that will solve our climate-related problems — there are no magic wands or silver bullets in the fight against the climate crisis.

In short, relying solely on green energy and technological advancements will not do; without behavior change at scale, no amount of engineering wizardry will save us from the climate crisis.

The solution to the climate crisis lies then not in technological advancements to make meeting our ever-increasing demands easier, but in behavior change that reduces those demands to begin with. Time to talk about behavior change.