The Jevons Paradox

On today's New York Times website, I found a business article entitled, "In New N.Y.U. Plant, a Collateral Carbon Benefit," which discusses a recently opened New York City power plant that "it gets almost three times as much useful energy out of a unit of fuel as a typical utility power plant does" (http://green.blogs.nytimes.com/2011/01/21/in-new-n-y-u-plant-a-collaterial-carbon-benefit/?ref=energy-environment). The article goes on to discuss that this new technology is beneficial for earths atmosphere, and may be essential to cutting carbon emissions and slowing global warming. After all, fuel efficiency does mean fewer emissions, right? A month ago I would have most likely adamantly agreed with this assertion and condoned the use of the new technology in all power plants across the nation. However, a subject of discussion in a recent economics class has caused me to be more reserved in seeing absolute benefits in the application of this new technology. This economic concept is called the Jevons Paradox, and, while unproven, it provides an interesting lens through which to look at the concept of fuel efficency.

       The Jevons Paradox stipulates that an increase in efficiency does not necessarily result in a decrease in the negative external consequences of a certain industry. Pretend someone invents a machine that makes the process of extracting energy from burning coal twice as efficient, meaning that the people dependent on coal based energy get twice as many kilowatt hours per lump of coal than they did previously. Now of course, if people's habits and consumption stayed constant, this new coal-burning machine would mean emissions from coal burning, one of the chief sources of pollution and greenhouse gas, would be cut by 50 percent. However, other forces play into this scenario. This new efficiency would significantly increase the supply of coal-based energy. This increase in supply would induce a lowered price of coal-based energy. This drop in price, in turn, would dramatically increase the quantity of coal based energy demanded, both by corporations and by personal residencies. Also, the lower price of energy for corporations would enable companies to produce goods at a lower price, which would increase the quantity of these products demanded by consumers. This new demand would inspire companies to consume even more energy to produce more goods so they satisfy the market. The Jevons paradox states that this coal required to meet this increase in consumption, both of coal itself and of the merchandise produced by coal-based energy, can be enough to completely cancel out the gains in efficiency made by the new machinery. In other words, the lower price of the more efficient energy causes people to use SO much more of the more efficient energy that emissions stay the same or even rise. After hearing the implications put forth by the Jevons Paradox, I find it difficult to believe any news source that says an increase in efficiency leads to an indisputable lowering of emissions, whether the article addresses an increase in the efficiency of coal or of any other energy resource. I cannot deny that economics class has turned me into a significantly more cynical person when it comes to the issue of climate change because of the intricate balance that holds our economic world together. While I would love to believe that the New York Times is a perfectly authoritative source on the issue of energy and climate change, the Jevons Paradox compels me to question the accuracy and the truth of articles triumphantly proclaiming new innovative methods for energy efficiency as agents for lowering climate change.