## Rebound Redux: Have we moved past Jevons on efficiency? – The Great Energy Challenge

James Barrett:

Rebounds Gone Wild – The Great Energy Challenge: Energy efficiency has become very popular in recent years. So much so that it’s becoming cool for the truly hip to hold it in disdain. Case in point: David Owen’s piece in this week’s New Yorker: “The Efficiency Dilemma.”... [H]e’s being contrary just for the sake of being contrary. I don’t want to make a habit of highlighting this type of work, and to do a thorough job of dismantling the piece would take more time and space than I have. But... I have a hard time letting such poor and frankly lazy reasoning pass without comment.... The focus of the article is something called the Jevons paradox (named after economist William Jevons), or the more common and more broadly defined “rebound effect.” In essence the rebound effect is the fact that as energy efficiency goes up, using energy consuming products becomes less expensive, which in turn leads us to consume more energy. Jevons’ claim was that this rebound effect would be so large that increasing energy efficiency would not decrease energy use....

To be clear, the rebound effect is real.... The problem with knowing how far to take things like this is ... the real world is complicated and trying to disentangle everything that’s going on is very difficult. Owen cleverly avoids this problem by not trying to disentangle anything.

One supposed example of the Jevons paradox that he points to in the article is air conditioning.... Owen notes that between 1993 and 2005 air conditioners in the U.S. increased in efficiency by 28% but by 2005,homes with air conditioning increased their consumption of energy for their air conditioners by 37%. Owens presents this as clear and obvious proof of a Jevons effect....

A few key facts disprove the point. Facts that are not hard to track down. I write for this blog in my spare time (for free), and I managed to find it without breaking a sweat. I’m not sure why a paid writer for a magazine like The New Yorker couldn’t do the same.... Real (inflation adjusted) per capita income increased by just over 30% over that time period. All else being equal, when people have more money, they buy more stuff, including cool air. The average size of new homes increased from 2,095 to 2,438 square feet, over 16%. More square feet means more area to cool and more energy needed to cool it. In 1993, of homes that had A.C., 38% only had room units while 62% had central air. By 2005, 75% of air conditioned homes had central units. Bigger units covering more rooms means more cool air and, you guessed it, more energy.... Finally, even though air conditioners were 28% more efficient in 2005 than in 1993, air conditioners last between 15 and 25 years....

Without the increases in efficiency, energy consumption would have been much higher.

Worse, and even more transparently wrong, Owen points to the increasing use of air conditioning in the developing world, especially India and China, as evidence of a globally expanding Jevons effect. Never mind the fact that income in China is growing something like three times as fast as in the U.S. and that the cost of air conditioning as a share of average incomes are falling at an even greater rate....

It’s easy to be sucked in by stories like the ones Owen tells. The rebound effect is real and it makes sense.... But it’s not enough to observe that energy use has gone up despite efficiency gains and conclude that the rebound effect makes efficiency efforts a waste of time...

Matthew Kahn:

Rebound Redux: Have we moved past Jevons on efficiency? – The Great Energy Challenge: In my undergraduate environmental economics class at UCLA, I ask my students to discuss whether buying a Prius could increase their gasoline consumption and thus increase their greenhouse gas production. David Owen would argue that it certainly could.  Suppose that I used to drive a vehicle that achieved only 25 MPG.  If gasoline is priced at $3 per gallon, then I used to pay 12 cents per mile of driving. If I now purchase a Prius that achieves 50 MPG, and gas prices continue to be$3 per gallon, then I will now pay a price of 6 cents per mile of driving.  This 50% reduce in the price of driving is likely to encourage me to drive more.   But, will my overall gasoline consumption actually rise? It only would if I respond to this reduction in the price per mile of driving by more than doubling my mileage. Why? Suppose I used to drive my 25 MPG vehicle 10,000 miles per year.  I would need to buy 400 gallons of gasoline for this driving. If I now drive my Prius 25,000 miles per year (more than double) then indeed David Owen would be right as he would observe that my gasoline consumption has increased to 500 gallons per year.  No empirical economist believes that the demand for driving is so responsive to this incentive effect.

In the case of car driving, remember that somebody has to drive the car! Suppose that you can drive at 30 miles per hour in your city.  To drive 10,000 miles per year will require 333 of your precious hours. While to drive a Prius 25,000 miles would require over 800 hours. Remember that time is money! Suppose that for every hour you drive that you could have worked and earned a wage of \$20 per hour.   Will owning the Prius really increase your driving?  A mile of driving a Prius costs you 6 cents of fuel and at 30 miles per hour costs you 2 minutes of time which valued at 33 cents a minute (20/60) equals 66 cents. So the total cost per mile is 72 cents.   A mile of driving of your old MPG vehicle costs you 12 cents of fuel and 66 cents in lost time so the total cost is 78 cents.  This reduction in total cost from 78 cents to 72 cents is tiny. As shown by this arithmetic, the "rebound effect" is swamped by the value of time....

Owens exaggerates the importance of the “rebound effect”. Recall that the rebound effect makes the counter-intuitive claim that increases in energy efficiency increase energy consumption. For products that require our time to use (such as driving) or for which we have limited demand (refrigerators), I do not believe that the rebound effect is an important issue....

My bottom line is that energy efficiency improvements will shrink our carbon footprint.