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13 August 2013

It doesn’t matter how much shale gas we’ve got, we still need energy efficiency

The shale gas revolution has brought down energy prices in America. It is said by many that the same would apply to Britain if we develop our own shale resources. Regional markets make that a questionable assumption, but if it’s right, then the economic case against renewables (and nuclear) would be strengthened.

Still, it doesn't matter how cheap gas gets in this country, there's no source of energy that's cheaper, cleaner or more secure than the energy we stop wasting. Therefore, shouldn’t we be at least as excited about energy efficiency as we are about shale gas?

Well, there’s an argument deployed by those who’d prefer to keep efficiency on the sidelines of energy policy (where, sadly, it still remains). It’s called Jevons’ Paradox and in a post on his Undercover Economist blog, Tim Harford takes up the story:

  • “William Stanley Jevons was born in Liverpool in 1835… He made some important contributions to economics – the young John Maynard Keynes thought Jevons was one of the outstanding minds of the 19th century – but he died at 46, drowning in the sea off Bexhill.”

Jevons became famous when in 1865 he predicted that Britain’s “economic prosperity was at risk because the country would run out of viable reserves of coal.” Posthumously, he was proved right  – about the coal, if not the prosperity:

  • “The coal industry did fall into decline. Production peaked exactly a century ago, when there were 1.1 million coal miners – four times as many as when Margaret Thatcher was elected in 1979.”

That, however, is not what he is remembered for today. Rather it was his rebuttal to the notion declining coal production wouldn’t matter because steam engines were becoming more efficient:

  • “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.”

This, then, is Jevons’ Paradox – efficiency increases demand for energy, because it increases the affordability of using more of it:

  • “When light was hugely expensive, a person might read by the fickle flame of a single candle; now it’s so cheap we flood our cities with it. Double glazing could mean lower heating bills but in practice it means warmer houses.”

There are natural limits to this effect. For instance, after a certain point higher room temperatures become uncomfortable. Another example is vehicle fuel efficiency, where getting more miles to the gallon doesn’t mean that you’ll want to drive more miles than you have to: 

  • “Aha, reply Jevons’s defenders: even if a fuel-sipping car does not induce me to drive much further, I may still spend my cash savings on some other energy-guzzling device.”

On the other hand, you might spend those savings on increasing the quality not the quantity of what you consume. You only have so many hours in the day to use them and, after your basic needs have been met, the purpose of consumption is to maximise enjoyment not energy use.

Therefore in a developed economy, efficiency measures not only promise to save us money, but to  meet our energy needs too.


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