Last year, the U.S. raised its fuel economy standards for cars and trucks for the first time in decades. By 2025, the fuel efficiency of vehicles will be required to double. As a result, oil consumption is predicted to fall and—given that the U.S. remains the world's largest consumer of oil—global crude prices might fall as well. That makes using oil cheap again, encouraging yet more consumption that ends up reducing the energy saving impact of the initial policy.
That is the story of the so-called "rebound effect," more properly called Jevons paradox, after W. Stanley Jevons, the British economist who first proposed it in his 1865 book "The Coal Question." Jevons paradox is undoubtedly real and has to be considered in any energy efficiency policy. After all, the last time the U.S. raised its fuel economy standards significantly in the late 1970s, global oil prices cratered not too long thereafter in the early 1980s. Or consider the refrigeration paradox: freezers have become better and better at using less energy to keep food cold. As a result, many Americans now have two: a modern, efficient one in the kitchen for comestibles and the old fridge in the garage or basement to keep the beer cold and freeze extra supplies.
But, although the rebound effect may be real, it is "too small to derail energy-efficiency policies," argues a team of four economists in a comment published in Nature on January 24. (Scientific American is part of Nature Publishing Group.) Using data from the Energy Information Administration's annual forecast, the researchers estimate that the rebound effect will reduce energy savings from the new fuel efficiency standards to 5 percent from 7 percent.
The economists take care to note the distinction between direct and indirect effects. So, for example, savings on fuel leads to an increase in driving, eliminating nearly a third of the efficiency savings. At the same time, money not spent on fuel is then often spent on other items that in turn require energy to produce—causing an indirect drop of five to 15 percent. Finally, at the scale of the national and global economy, oil not used in cars in the U.S. will be used in cars in China, along with other displacement effects.
Lumping all these factors together, the economists estimate that "total combined rebound effects [are] in the range of 20-60 [percent]." They add: "in sum, rebound effects are small." Only an economist could argue that 60 percent is small.
Consider another modern tale: in the 1960s computing was confined to energy-hogging mainframes to which only a few people had access. Today, billions of people on the planet have much more energy efficient laptops, desktops or smartphones and rely on the constant processing power of rack after rack of servers for services such as Internet search or email. As energy efficiency researcher Harry Saunders observed in an interview with The Breakthrough Institute: "The total energy use for computing is probably at least an order of magnitude greater," despite the fact that mainframes individually used more power.
At the same time, individuals often ignore energy efficiency measures—even when they save money—perhaps because of the hassle of changing a light bulb. There is some evidence, however, that tapping into a more primal instinct than savings—competition—can spur individuals to undertake energy efficiency improvements. It can even be as simple as a smiley or frowny face on an electric bill.
Some argue that, over the long-term, the rebound effect actually "backfires" and ends up promoting even more energy use than was saved in the first place. This is the argument Jevons made about coal use and, given global coal consumption trends 150 years later, it's hard to argue with him. Or consider the rise of the sport-utility vehicle in the 1990s after a decade of low oil prices in the 1980s. Global oil consumption has never been higher.
But efficiency measures do save some energy. California has kept per capita electricity use the same for the last 30 years, despite the proliferation of gadgets, heated swimming pools and air conditioners, among other modern conveniences. In fact, energy efficiency is a much better way of meeting growing demand for power than building a new power plant—as the U.S. economy has grown, efficiency has kept energy use from rising anywhere near as fast. And efficiency can help combat climate change. Consider this: simply switching all Canadian furnaces to the most efficient natural gas ones could cut that country's (growing) greenhouse gas emissions by 40 percent, according to energy expert Vaclav Smil of the University of Manitoba.
The world requires a lot of power—16 terawatts per year and growing. Most of that power comes from burning fossil fuels and, as a result, the greenhouse gas emissions driving climate change continue to swell—34.7 billion metric tons of carbon and growing. Given that twin challenge, even slowing the rate of growth is a major achievement—and it should be a requirement for any serious effort to combat climate change.