What is the Jevons paradox, and does efficiency really raise use?

The Jevons paradox describes a situation in which technological improvements that make a resource more efficient to use lead to a rise, rather than a fall, in total consumption of that resource. Each task needs less of the resource, but the gain encourages enough extra activity that overall use goes up. It is named after the English economist William Stanley Jevons, who described the pattern for coal in 1865 in The Coal Question. [1] [2]

Greater efficiency lowers the effective cost of what the resource achieves, such as a kilometre travelled or a unit of manufactured output. Under the law of demand, a lower cost raises the quantity demanded. If demand is sufficiently price elastic, the extra use can outweigh the savings per task. Lower costs can also bring in new users and make previously uneconomic activities worthwhile. [1] [2]

A simple travel example shows the logic. If a vehicle's fuel efficiency doubles and fuel prices stay constant, the effective price of travel halves. If people then buy more than twice as much travel, fuel use rises. If they buy less than twice as much, fuel use falls, though by less than engineering calculations would predict. [1]

The rebound effect is the portion of expected savings that is lost because people respond to lower costs by using more. The Jevons paradox is the extreme case in which the rebound exceeds 100 percent, sometimes called backfire. The Harvard Chan School gives a worked example: if electricity per task halves and usage triples, total consumption becomes 1.5 times its original level. If usage rises only 50 percent, consumption falls by 25 percent, which is a rebound but not a paradox. [2] [1]

Rising consumption alone does not prove the paradox. The increase has to be attributable to the efficiency improvement, compared with what would otherwise have happened, and spending, electricity use and emissions are different quantities. [2]

Researchers agree that rebound exists but not on its size. An ecological economics encyclopedia chapter says that after more than four decades of research there is consensus on the existence of the effect but not on its magnitude. Wikipedia's summary notes that some people dismiss the effect as minor, while others worry that pursuing sustainability through efficiency alone may be self-defeating where the market price of a commodity is below its true cost. [3] [1]

Environmental sociologists Richard York and Julius McGee separate an empirical claim, that efficiency is often associated with rising consumption, from a causal claim, that efficiency leads to greater use. They report that positive correlations are common, and that in national panel data more efficient nations tend to have faster growth in electricity use, total energy use and carbon dioxide emissions. They say some explanations involve other mediating factors rather than a direct causal link, and others do involve causation through how efficiency shapes development paths. Other sources note that real goods use several inputs besides fuel, such as labour and machinery, which tend to reduce rebound and make a full paradox less likely. [4] [1]

Some environmental economists have proposed pairing efficiency gains with conservation policies that keep the cost of use the same or higher. Measures that raise the cost of use, such as cap and trade or green taxes, can be used to control the rebound effect. [1]