As a note, parts of this post are from an older essay I wrote awhile back which was in reply to a recent Obama initiative at the time to put huge amounts of money into “making cars more efficient” or perhaps “increase their MPG” is the better way to phrase it.
Either way, it’s not that cut and dry. Jevons’ paradox goes back to 1865 when economist William Stanley Jevons noted then that coal efficiency improvements had not just increased the amount of work done, but had actually increased the overall amount of coal used as well. This process is rather well-known in that although increases in efficiency will result in more efficient usage of energy, it will almost always result in more usage of the said resource needed due to lower costs that in turn drives economic progress.
William Jevons
http://en.wikipedia.org/wiki/File:PSM_V11_D660_William_Stanley_Jevons.jpg
The other option is that increases in efficiency are so great that the increased demand and usage of the commodity are not enough to actually increase usage of the commodity which therefore results in much less of the said commodity to be used. The Rebound effect is therefore the increases in the usage of energy that resulted in higher efficiency of said commodity for the same amount of work. Anything less, and the gains will be offset by the losses. It should be noted that as you look at economic progress and look at it from a longer time-scale, the lower costs and higher efficiency will always eventually reach a point where people use more of the commodity. This is just a question for “how much time is required for this to occur?”
Here are the relevant charts (from Wikipedia) that demonstrate this process:
I tend to think these graphs illustrate the rebound effect very well which is why they are included and they are very relevant to further discussions.
Source for these charts:
http://en.wikipedia.org/wiki/File:JevonsParadoxB.png
http://en.wikipedia.org/wiki/File:JevonsParadoxA.png
As can be seen from these charts, the largest difference occurs (and Jevons’ paradox occurs) when in fact the demand rises so much as to cancel out gains in efficiency. In this case the rise in demand of the commodity also drives up prices, which results in less demand overall, but with the increased efficiency you still end up using more of the said product then you did before.
In essence, this discussion results in a final conclusion that follows:
Jevons’ paradox states that increases in efficiency can possibly have 2 effects: (this was better defined under the Khazzoom-Brookes Postulate.)
1. Immediate direct rebound effect. Whenever the cost of something goes down, there will be an immediate increase in demand. It should be said that with oil this may not be as high, so the second point should be looked at.
2. Increased efficiency leads to economic growth.
There should be a note in caution with Jevons’ paradox. Although it tends to discuss lesser gains in efficiency and how in every case seen to this date that the rebound effect always over-took the increases in efficiency. To this date, this is very rare to never existing (I will not debate this at this point..needless to say increases in efficiency have tended to always increase the amount of that resource being used.) So it is in essence possible that someday we will have such gains in efficiency as to actually decrease usage of said resource. But since it has not been seen ever, and the fact that increases in efficiency savings have never over-topped the increases in usage, its safe to say that putting money into increasing efficiency will NEVER have the effect of decreasing usage of any commodity. This is not proven like I stated, but since we have never seen it, will we ever?
Critics of the Jevons’ paradox point to individual points of time that seem to show otherwise, but in the end the statistics are clear. As our homes have become more efficient (you can start in the year 1960, 1970 or any year you want) and despite the huge increases in efficiency, the average home uses more energy then it did prior to the improvements in efficiency.
I am not for once stating that higher efficiency is not something to strive for or that it’s a bad thing at all. On the contrary, I am simply stating that it’s a fact that increases in efficiency results in more usage of a certain product. This is the gist of Jevons’ paradox and where-ever you look this occurs. I don’t care if you talk about AC’s (which is a recent discussion on this topic:)
http://pathsoflight.us/musing/?p=1253
http://thinkprogress.org/romm/2011/02/16/207532/debunking-jevons-paradox-jim-barrett/
Or cars or even trains and planes. Everything that uses energy suffers the rebound effect and if people can use more energy for the same cost, they will do so at every opportunity. This is the main impetus of economic growth: energy usage and it can be seen everywhere.
This fact alone leads us to some interesting conversations in relation to the future as far as policy goes. As I stated at the beginning, I first wrote parts of this essay back when the idea to increase fuel economy in vehicles was being discussed. I noted that more than likely, it would directly result in higher consumption in fuel overall, but this in turn would also drive further economic growth if we did indeed see meaningful increases in efficiency. So this in itself is not a bad thing, but the goal is not going to accomplish what it was set out to do, which is a mistake. This is why you should study possible solutions to a problem before just coming up with ideas that make you feel good.
This means that efficiency is a great thing to strive for if for nothing else but economic growth. It is well-known that usage of energy and economic growth go hand in hand, but it shows that if you do indeed want to use less of a resource, increasing the efficiency is not the route to go.
Indeed, the ony way to decrease the usage of a resource is to raise its price artificially. There is no other way to do this and by adding taxes as such on energy, you also have another and different rebound effect that results in economic loss as a whole. So there is no safe and clean way to decrease usage of a commodity. In the end, everything you try will either backfire or decrease economic growth. This is the nature of the beast of “limiting usage of resources.” It’s a fruitless gesture and by the time we do end up (possibly running out of a certain resource) human ingenuity has always saved us with an invention that in turn results in even higher forms of energy usage which has been the litmus test of economic growth since the Middle Ages. Track energy usage starting in roughly the year 1300 and you will see the linear relationship between economic growth and energy usage.
So if people are truly worried about the amount of oil in the world, the best place to start would be to funding Research and development of alternative sources of fuels. Nothing else will stop our usage of oil, and only higher costs will force us to the next thing. So do not rail against higher usage of a commodity, rail against lower usage which prolongs the inevitable: human ingenuity bringing us to the next big energy source. Just like coal back in Jevons’ day: we will someday be using cleaner energy sources and unless artificially inflated due to taxes, our energy will be like-wise cheaper.
The future can also look dirty too, and that is the result if we curtail economic growth too much in the form of taxes. So say no to high carbon taxes and say yes to abundant and cheap energy.
Notes:
Jevons’ paradox is still a hot area of contention to this date. This argument can spread into many other spheres of discussion including CAGW, peak oil (as I briefly brought up) and of course energy policy.
Sources:
http://en.wikipedia.org/wiki/Jevons_paradox – Charts and pictures are from this location.
Other sources were linked to but were not cited directly.
BenfromMO 
