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Jeff Vail posted an excellent article discussing Jevons’ Paradox and energy policy. After a few days of thought I wanted to revisit the topic.
The main point of his article, IMHO, was “Should we try to use government policy to increase efficiency, if we know that energy savings will just be consumed elsewhere?”
Jeff did a good job defending the answer of “NO” (and he later softened that position). I am going to attempt to defend an answer of “YES” (hopefully without making myself look too much the fool). Detailed below are several reasons that a policy of energy efficiency improves our society’s chances for long term survival. Instead of focusing on not spending the energy, it is more about how to spend the energy to best effect.
Many of these points were made in the prior discussion, but scattered around in comments. I wanted to summarize them and begin another round of discussion.
Cartel Controlled Market
The world oil market has pricing controlled by a cartel. This cartel is defending a price floor. As efficiency increases, prices are pushed toward the floor and the cartel removes oil production from the market. Production removal delays the day that peak production arrives.
Essentially the cartel is fulfilling the same function as complex government regulation. The cartel keeps efficiency gains from being instantly consumed in the new demand created by a price drop.
World governments could improve this process by entering into agreements with the cartel to defend a higher price floor. Essentially, this works as giving up economic growth now in favor of a longer term energy plateau (which is what we want to happen).
Preparation for Fossil Free Future
Eventually, society will be totally dependent on sustainable flows of energy. These flows will be much smaller than fossil energy flows. Our future quality of life is dependent on having high efficiency products available to make the most use of limited flows.
It takes years to create more efficient products. And it takes decades to shape more efficient cities. Any kind of efficiency policy begins this transition before the market price signals, giving society more time to adapt and soften the landing.
CAFE is a good example of preparing for the future. It takes years to generate new car designs, retool car factories, and replace fleets of cars. The Hirsh report stated it would take 15 years to replace the current fleet, and more than 20 years before most of the fleet was at maximum CAFE efficiency levels (it takes years to phase in the higher mileage requirements and more years to replace the fleet vehicles with the highest mileage versions).
By passing the CAFE legislation now, we prepare our vehicle fleet for a world with much less oil. If we waited for market signals to drive the change, the replacement would start too late and the replacement rate would be much slower as people are forced to stop purchasing vehicles because they are hemorrhaging needed capital on energy expenses. (Vehicle sales drop during recessions).
Giving Others a Chance
Efficiency measures lower the cost of energy, and this lowered cost increases demand “elsewhere”. One key item is that “elsewhere” might be a place that really needs that energy (like Africa) or a place that is making smarter choices (like Europe) and directing that energy into sustainable flows (wind) or long term investments (rail).
High EROI fossil energy sources give a society an “agility” to change course. Efficiency in one country opens opportunity for other countries to invest with greater speed.
Dennis Meadows has an example in his ASPO presentation on how the rate of self capitalization of nuclear power plants is severely limited. The lower the EROI, the lower the rate of growth (or change).
Carbon Tax and Production Credit
When the last drop of fossil energy is gone, the size of the world economy will be dictated by the size of the sustainable flows we have built for ourselves. Society should be investing in creating sustainable flows.
The problem is that the EROI of sustainable energy sources is less than that of fossil energy sources. So it will *always* cost more to get energy from sustainable sources until the fossil sources are greatly depleted. This is a disaster in a society that expects “market forces” to solve the energy problem. Essentially, market forces will do everything they can to worsen the energy problem by *delaying* investment in sustainable flows until it is too late.
By too late, I mean that EROI of fossil flows is reduced to that of the sustainable flow level, which drastically reduces the growth rate available for self capitalization. Essentially, if a society waits, it will never be able to transition before the fossil fuels are exhausted and the society collapses.
Some form of Carbon Tax plus sustainable flow Production Credit is needed to correct this EROI imbalance before it happens naturally. A carbon tax that offset half the EROI would lower use of the fossil fuels (but not stop the use so the high EROI can be put to work). A production credit would encourage the investment of sustainable flows and keep the efficiency savings of the Carbon Tax from being lost in consumer expenditure.
This is just an example and I am sure there are better ones. I bring it up because some efficiency measures provide a way of pushing more investment into sustainable flows.
It hasn't happened.
It isn't happening.
It will never happen.
It isn't that you're a "fool" (you write much more intelligently about the subject than I could).
It's that governments are insane.
It isn't even so much that they are insane, it is just that those that actually run governments run them to advance what they perceive to be their own interests. Those interests do not at all match the interests of the people who do not run the governments, or with the general interest of the nations being governed. Their perceptions with regard to their own interests may even be incorrect, but that is a different issue from insanity.
The biggest problem is that governments tend to be run by men in their fifties or older, who know that they are going to be in power for only a few years (and alive for only a few years beyond that, at best). They thus have an extremely short-term focus. Crises that unfold slowly over decades with long term consequences that could last for centuries or forever and that require long-term mediation efforts simply don't make it on to their radar screen.
It is a difficult problem, and I'm not sure that a really good solution exists for it. Philosopher kings, anyone?
Governments are either insane or have a logic that is not apparent to us "common folk".
Our entire culture is insane.
More likely our society is inebriated with cheap and easy power. Perhaps sanity will return when this "drug" supply runs out.
Of course, it won't be fun going "cold turkey".
Well is the government of Norway insane? Switzerland? Germany?
I think a government generally works pretty well to advance the interests of the predominant powers. So I wouldn't let "the people" off the hook so easily. GWB was elected at least one time after he had already been president for a full term.
In short, the "government" is part of our society and just reflects what the people are really about as an aggregate. Pretty sour lemon but there it is.
Personally I think this is too pesemistic a view. I don't think the government is particularly representative of the people at all. Rather Bush and his friends really represent the classs interests of about 1% of the population, well let's be generous and call it 5%. The fabulously weatlhy and powerful elite that controls well over 50% of the wealth of the United States.
These people also own, in a literal sense, the mass media. So their particulur view of the world, almost automatically becomes our view of the world.
For the last twenty odd years a "class-war" has been raging in the United States, where the rich grab more and more from almost everyone else and remove themselves increasingly from the sphere where most Americans live and work. Once borrowing becomes more difficult and the debt bubble bursts, the true extent of the massive re-distribution of wealth to the rich, will become startlingly apparent to all but the most obtuse.
It amuses me to do so, but I can hold these two views in my mind at the same time; they don't seem all that opposed to each other. In fact, I believe there are major differences between nations in how they approach these issues (or, whether they acknowledge them at all, in the case of the US), and these differences reflect what one might call a "nation's culture." Do the people of the US have steeper discount rates than those of Sweden? Because they're sure acting like it.
If they push it too far they may need more then just Blackwater.
I would very strongly dispute this.
The US is the large problem child but the people of the US have been under constant planned attack for decades now. It is unfair to blame it just on the people, especially when ignorance is rampant due to a education system that teaches more social engineering then any other kind.
The insanity is to have a system that for all practical purposes is a single party under the same ownership and with no social responsibility whatsoever. The demand side of this social responsibility has been destroyed by the planned influx of minorities and undue favoritism for some sectors of the welfare establishment with the deliberate intent to create friction.
You end up with factions that will never work together, just like Palestine or Iraq, and the small minority at the top that owns all the politicians laughs all the way to the bank.
I understand that many people here are far more educated then me, but the view from corporate penthouses and gated communities isn't the same as from street level.
The problems are leveraged on the street, it will not take all that much for things to get out of hand.
All the technical ideas are interesting and pursuable, but they are not going to work without a systemic change that evens the playing field or at least is perceived as evening of the playing field.
Comparing the US with Europe other then perhaps the UK in 2007 is like comparing apples and oranges.
Good point. Currently, one of Germany's major unions is planning strikes, because they feel that company profits belong to the workers in at least equal measure to managers/shareholders. (That the union demands are as extreme as the corporate counter-offer is standard horse trading.)
200,000 workers participated yesterday, apparently, in what was merely a 'warn strike.'
There seems to be a certain awareness that if you don't stand up for yourself as a worker, no one else will. And an awareness that the people actually doing the work are the workers, not the managers and shareholders.
The same applies to many aspects of life in Europe - and when it is described in the U.S. press, this idea that people standing up for their rights becomes an object of ridicule or scorn (not that critical judgment shouldn't be used - but that is often notably lacking). Or is just ignored.
No, it really isn't possible to compare the U.S., where apparently 40% of Americans believe they will end up in the richest 1% of the population, with Europe.
I may add, another difference is that Europeans tend to be a lot less binary in their thinking than Americans. When describing how Germany, for example, is attempting to handle challenges which are clearly facing the world in the future, it is often assumed that Germany is either a paradise or a hell. Instead, it is a complex interplay, a truth which Germans see as commonplace.
That was one tactic of the plantation owners in Hawai`i. (They resisted statehood for as long as they could, because they didn't want to be subject to U.S. labor laws.) They brought in indentured laborers from many different countries: China, Japan, Portugal, Korea, etc. They housed them separately and gave some ethnic groups preferential treatment. (The Portuguese got to be supervisors, since they were kinda sorta almost white.) They didn't want them to be able to communicate and thus unionize.
There is another critique to the Jevons' Paradox that could be mentioned.
Even if one accepts the argument that money saved through energy efficiency is used to increase demand for consumption of other items, it must be noted that such demand and consumption would not otherwise exist. In other words, the demand curves for the other categories of goods must be more elastic than is the case of energy. If they are more elastic, then a subsequent reduction in the supply of energy (which given peak oil is inevitable) will result in a further round of energy price increases and demand destruction. Because the demand for energy will still be relatively inelastic compared to many other goods, consumers will have to pay for their higher priced energy by reducing their demand for other goods with more elastic demand curves. Thus, given an energy supply curve that is constantly shifting due to continuously declining supplies (post-peak oil), the Jevons' Paradox effect must only be transient at best.
Under such an energy supply and price environment, the only rational course of action for any consumer that is able to realize savings due to energy efficiency investments is to reinvest those savings in further energy efficiency investments in anticipation of even tighter energy supplies and higher prices in the future.