Thursday, April 17, 2008

Better cars a waste of energy

Today there is a lot of talk about saving energy, greener this, greener that. What is missing is some honest economics. In economics quantitative change in one area is usually subsumed quickly by another. Simply reducing energy use is a fruitless exercise if the system that demands more energy is left in place. What the world needs is a re-evaluation of the autosprawl system, done by economists and scientists who are not on the payroll of interested parties.

What we should be doing is overturning the whole energy wasting system of autosprawl which could be accomplished by eliminating the carbon-auto subsidies, starting with taking the tariff off of our public investment in transit, i.e. making public transit free.

Here, from the Economist, is the simple, intuitive, economic argument that is missing from 98% of the talk about "going green."

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.
Since then, says Steve Sorrel, an economist who produced a report about the rebound effect for Britain’s Energy Research Centre, there has been little research into just how big the rebound effect is. Estimates of the “direct” effect range from almost zero to over 100% (ie, greater efficiency encourages so much more consumption that net energy use actually goes up).
The precise size of the effect depends on both the good in question and the wealth of those consuming it. “The potential for a big rebound is higher when you’re looking at low-income groups,” says Mr Sorrel. “Lots of poor people can’t afford to make their homes as warm as they’d like. So they’ll take any efficiency improvement in the form of more heating, whereas the rich—who are already comfortable—will probably spend the savings on something else.”


Anonymous said...

I don't think you can apply this to home heating because people don't exactly want the furnace to run -- they want to be comfortable. Better insulation and a more efficient furnace (more heat out per unit fuel) both lead to more comfort at lower cost. Poor people live in badly insulated and weatherized homes -- that means the furnace is already running too much. Better insulation just means they can set it at a reasonable level and it won't run so much -- less fuel use.

I agree with your argument relative to auto miles driven though. Lots of data on that.

fpteditors said...

Less fuel use for individual households, true. But that reduces price pressure and allows more sprawl. We need to end sprawl not enable it. That can only be done by ending autosprawl subsidies and removing the tariff from our public investment in transit.