Improving energy efficiency is our best hope to slow global energy consumption and limit carbon dioxide emissions.
Makes perfect sense, right? Better technology for more jobs and a healthier planet! Yay capitalism.
But let's look a little closer. People may choose to drive more often if a vehicle is fuel efficient: driving is useful or pleasurable and now it is more affordable. Or, less money spent on fueling energy efficient vehicles could enable more money to be spent on fuel for home air conditioning.
Economist do acknowledge this to some degree referring to a phenomenon called "rebound". A very few studies even argue for “backfire”: gains in energy efficiency ultimately lead to greater energy consumption. The idea was first introduced by 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.
Calculating the total magnitude of rebound or backfire has proved contentious and elusive. The problem for academics has been that any given efficiency improvement has knock-on effects that can eventually propagate through the entire global economy. Estimating the ultimate impact is daunting if not impossible.
Imagine you buy a nice new fuel efficient car. An unequivocal good for the environment, right? Sure feels good to do one's part to save the planet. And you have a fatter wallet too since you spend less on gas. Life's good! You can spend that saved money now (for argument’s sake) on better household heating and cooling so that you sleep better at nights. Being more rested you become more productive at work, giving you a raise and your employer higher profits. The business grows to consume more while you take that much deserved flight for a vacation in Cancun.
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 like a growing child
There’s a way around this complexity - to ignore it, by treating the economy only as a whole.
Stepping back like this is a standard part of the physics toolbox. Imagine describing the growth of a child without being an expert in physiology. It shouldn't take a doctor to comprehend that the 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!).
Now, 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 and some day become a robust adult who consumes food energy at a much higher rate than 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.
Efficient civilization growth
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. Just 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. It was by being efficient that civilization was able to increase its size.
When civilization expands, it increases its ability to access reserves of primary energy and raw materials, provided they remain or are there to be discovered. Increased access to energy reserves allows civilization to sustain its newly added circulations. If this efficiency is sustained, civilization can continue to grow. In a positive feedback loop, expansion work leads to greater energy inputs, more work, and more rapid expansion.
This is the feedback that is the recipe for emergent growth, not just of civilization, or a child, but of any system. The more efficiently energy is consumed, the faster the system grows, and the more rapidly the system grows its energy consumption needs.
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.
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