...a 12% improvement in fuel efficiency sounds impressive. But economists know better.
Because fuel costs are a significant part of the total price of running a car, lowering them means cheaper motoring. And cheaper motoring, all other things being equal, means more motoring. The same applies to flying, home insulation or
industrial processes: any reduction in energy use means a reduction in cost which, in turn, leads to an increase in demand, eating into the savings from more frugal engineering. In energy economics this is known as the “rebound effect.” It was first described in 1865 by William Stanley Jevons, an economist investigating steam engines....
Monday, March 24, 2008
The Economist spells it out [emphasis ours]:
at 11:56 AM