In a perfectly competitive market, the price of a product is given by its minimum average total cost of production. The lower this is, the lower the price. Technological advances have reduced the costs of operating a fridge, air conditioner, washing machine etc… etc…. Consumers will buy more of them and consume more electricity and produce more greenhouse gases. How much more depends on the elasticity of demand. If elasticity is high, energy consumption may go up so fast that it results in greater resource depletion with greater energy efficiency. This is basic economics and was known in the nineteenth century. It is known as the Jevons paradox and is the topic on an article in the New Yorker (subscription required):
In 1865, a twenty-nine-year-old Englishman named William Stanley Jevons published a book, “The Coal Question,” in which he argued that the bonanza couldn’t last. Britain’s affluence and global hegemony, he wrote, depended on its endowment of coal, which the country was rapidly depleting. He added that such an outcome could not be delayed through increased “economy” in the use of coal—what we refer to today as energy efficiency. He concluded, in italics, “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.”
Jevons is now known more as a utilitarian and one of the founders of mathematical economics. Who knew he combined the practical with the theoretical?
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December 21, 2010 at 8:03 pm
twicker
IMHO, you’re very right to lead with the discussion of the elasticity of demand. The refrigerator is the big-ticket item; as such, it’s not likely to be terribly elastic. I expect that few people who wouldn’t both:
(a) be able to afford a big-ticket purchase such as a refrigerator, and
(b) need a refrigerator
would then be in the market for a refrigerator. Because of this inelasticity in demand for the actual product, I suspect there’s likely to be a net positive effect of efficiency requirements for it.
Efficiency requirements for cars would be a good target for this observation, IMHO. Back around 2008, it occurred to me that, if you make cars more efficient without driving up the price of petrol, then people just feel more comfortable driving longer distances (e.g., a longer commute to work, longer trips to the store for just the right item, longer trips to kids afterschool activities, etc.). You’d gain efficiency in the motor fleet, but lose it because of the very phenomenon that you and Jevons allude to (it’s easy to choose to drive more miles with your car or choose to use it on days when you might otherwise telecommute or stay at home with the family; it’s extremely difficult to fit more than an amount X in one’s refrigerator, or to use the refrigerator for more than 365 or 366 days a year, depending on the year).
Given that, I became less of a fan (though still a fan) of CAFE standards, and much, much more of a fan of higher gas taxes (which would promote both efficiency and shorter trips).
January 2, 2011 at 6:40 am
Reed
Oh well the paradox could be more of a counter slap in terms of energy consumption, but look at the bigger picture, where energy produces something. where the work is productive, optimization of energy input IS much of benefit even when the input is greater in amount. Cheers..