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Energy Efficiency-A Good Idea?

By Abby Yu and Ruinan Liu

As we make energy consumption more efficient, would we use more or less energy? Logic would say that higher efficiency results in less wasted energy consumption. Large cities are especially concerned with their energy consumption and ability to save on future costs. However, according to the Khazzoom-Brookes postulate, increased energy efficiency only causes higher energy demand and therefore more consumption. This argument is based on household demand and the perception that gains from energy efficiency are decreases in price. Gains in efficiency will also create gains for labor or other capital from saved revenue; however, this means more energy is consumed from saving on using human or machine capital.  

The graph below shows the steady rise in energy consumption with coal being the one to drop the most. As for energy efficiency, the EPA said in 2016 that the average mpg for new vehicles increased to a record 24.8. However, we do not see fuel efficiency and consumption moving together.

In the macroeconomy, as efficiency improves, prices will fall and consumer demand will increase. According to the New Yorker, energy production increased by 66 percent from 1984 to 2005 despite better energy efficiency. This resulted from both population growth and more consumption per capita. Another example from the article was fuel oil; the average driver gets more out of a gallon of gas than a driver from 1920. However, the population as a whole now consumes more energy.

Do you think we should go so far as to produce inefficient forms of energy production (slower cars)  to decrease consumption? What are the ways we can actually reduce energy consumption? What would it take to disprove this postulate?

26 thoughts on “Energy Efficiency-A Good Idea?

  1. lentza20

    I think it is an interesting thought to try to create less efficient energy sources to reduce consumption, but I don't think it is very possible. In order for the entire market of cars, for example, to work in unison to decrease consumption it would be a miracle. There is no reason for any industry to try to make something less efficient to decrease consumption, because that in turn means a decrease in profits. Although it would be an interesting study to see if slower cars meant less driving, it is not a method of energy reduction I expect to see in the near future. As far as reducing energy consumption goes, I believe creating alternative energy sources that are more efficient and less expensive is the way to go. After all, like you guys said in your question, the cheaper the energy, the more people want to buy it. So, if we can produce a clean type of energy that is less expensive than gas or coal, then we could enact serious positive change for the environment while increasing consumption and growing the market.

  2. patelp20

    I do not think that we should go out of our way to make less energy efficient cars by any means, because if our energy consumption does not change than we would end up using even more energy because of that. I think that we will continue to use more and more energy as we progress because of population growth and reliance of new technologies on increasing amounts of energy. As we begin to automate more and more parts of our society its no wonder that we are using more energy. You guys said that a reason energy consumption is increasing is because energy is becoming cheaper. So a possible solution to this problem would be for governments to regulate energy prices as a method to limit consumption. However this idea sounds good as a theory but actually implementing that legislation would be very hard.

    1. yuy20

      Finding a government-based solution would definitely require a lot of discussions in terms of politics. They do have a lot of options when it comes to energy regulations. One way could involve impacting households' future decisions through taxes. If fuel played a larger role in consumption taxes, this may change households' decisions when buying products such as cars or other appliances. People won't like higher taxes, but making energy a bigger portion of taxes can possibly change behavior.

  3. hermana20

    It is interesting to note that coal consumption as an energy source has decreased significantly from around 1990 to the present day. This trend is likely explained by the fact that we have more successfully begun to tap into our domestic natural gas supply with new fracking technology, and under Obama we began to switch away from fossil fuels to renewable forms of energy like wind, solar, and hydroelectric energy. However, the current administration wants to bring coal back, and has lifted many of the environmental regulations put in place by previous administrations. What is interesting, is the sharp spike in consumption of "other renewables" such as tidal energy. The more renewable we become, the less consumption will matter because increased energy consumption on an entirely renewable grid will simply mean that those who consume more will have to pay more, instead of it becoming a question of pollution and carbon emissions. To reduce our energy consumption right now, people in their quotidian lives can turn of lights when they are not being used, drive less, and take shorter showers.

    1. the prof

      To my knowledge tidal energy is a trivial component of renewables – are there any commercial projects in the US? In contrast we at W&L have a solar array over the parking deck, though we don't have any windmills. Parts of the midwest have lots of those. But note that the causation is the fall in costs due to better technology, and not primarily who was president. Yes, there are subsidies of various sorts, I don't know the timing or whether they made a difference.

  4. johnsonj20

    The Boeing business case, which is discussed on page 274 of the book, serves as a good example of the postulate that greater energy efficiency increases energy consumption. Greater efficiency and more consumption spell economic growth, which can fund R&D to fuel new innovation. If the innovations are environmentally friendly, then more energy consumption would be a win-win scenario for the economy and the environment. Therefore, I advocate energy efficiency in the short-run to fuel more sustainable long-run energy consumption. I agree that the government should impose taxes on traditional energy or subsidize renewable energy production to incentivize consumers to instead consume alternative energy and continue the graph's trends that show a shift toward alternative energy consumption.

  5. Chris Vogel

    There are many reasons as to why the US has increased energy consumption, especially since the 1920's. Firstly, the standard of living has drastically increased since the 1920's, allowing more people to afford energy based products such as cars. Secondly, the world's population was two billion in 1920, compared to over seven billion today. Lastly, advances in technology and capital has made consumption of energy based products more affordable to the every day person. All of these factors lead to greater energy consumption. In an economic sense, producers and consumers will alike switch to renewable energy sources if the marginal cost of renewable energy is less than the marginal cost of non-renewable energy. While there will be some sort of rebound effect due to decreased costs of consumption, as long as the energy is renewably sourced, it should not create the issues of externalities. While I don't think consumers will allow the market to switch towards slower vehicles, another effective way to address non-renewable energy consumption, is to implement taxes that account for ecology damage, pollution, and the greenhouse gas effect. This would force people to pay the cost society faces from consumption and ultimately increase the cost of non-renewable energy. Another way would be to subsidize clean energy use or technology development, essentially rewarding those who do not cause external damage from their consumption. Either way, there would be a trend towards more clean energy use from these policies. However, with a increasing populations and living standards, it is unlikely that overall energy consumption will fall in the long run. But nations can promote policies to help combat the negative side effects of energy consumption.

  6. gutierrezcuadras20

    We should not go as far as to produce inefficient forms of energy production. If you make cars slower, I assume that change means making cars get less mileage per gallon. Slower cars would not stop people from using their car more/ consuming gas because people would still need their cars to drive to jobs and get to their general destinations. If you really wanted to reduce energy consumption, raising the prices of petroleum, natural gas, coal, and the like would reduce consumption as people would adjust their behavior in the long-term by possibly turning to alternative energy sources. However, this would only in the long term given that gas in inelastic, meaning that changes in prices would not change demand in the short run.

    1. the prof

      Slower speeds mean better fuel consumption – especially above about 60 mph wind resistance is important, and the impact of "drag" goes up faster than speed, so at 75 mph cars are much less efficient. I have a "mpg" indicator in my car, it's easy to observe how going faster uses more gas. Right now though car companies advertise power – that's one of Tesla's selling points, great acceleration. A Tesla is not efficient relative to a modest-sized (found in Europe and Japan but not standard in the US!) gasoline-powered car.

  7. Juliana Kerper

    I don't think energy should be produced inefficiently to reduce consumption. Instead, I believe consumption could be limited as was stated above, perhaps by government mandates on the amount of energy that can be consumed per household/business or by putting taxes on energy use. It seems like there would be too much environmental activist group (and public) backlash for the government to even consider inefficient energy production. It seems that demand will increase inevitably, due to both increases in the population and increased demand for energy supplied at a lower price. I also agree that greater efficiency combined with more consumption will fuel innovation towards finding new energy sources that are cleaner and can be produced at a lower cost. I think in the long run, we'll find energy that is cheap, clean, and hopefully renewable, so increased consumption of that energy source won't be a problem.

    Also, in the short run, doesn't energy efficiency sometimes cost more for consumers?

    1. yuy20

      Changing to more efficient forms of energy, especially if it's new technology, may create higher costs for consumers. However, this change would likely not happen immediately, and consumers have time to adjust to new energy.

  8. Nate Abercrombie

    Is it entirely possible to know whether higher energy consumption is a caused by or just correlated to increased energy efficiency? Using electronics, cars, machines, etc. that are more efficient is undoubtedly a positive occurrence, and the idea that less expensive energy would drive up consumption makes sense, but can the two be directly attributed to each other? Cultural changes in how much increasingly involved technology has become in Americans' lives have surely had an impact on increased electricity consumption per capita. In the case of fuel prices, it has been shown that people will change their spending habits before they change the habits of their daily lives. For example, there was a marked increase in purchases of higher MPG vehicles during the high gasoline prices of the mid-2000s, but little to no changes in average distance driven by the normal American. Regardless of whether or not the two are directly attributable to each other, it would make sense that levying taxes on energy consumption (although it would increase negative externalities) seems like most likely solution to drive down consumption per capita.

  9. the prof

    • will energy consumption naturally fall with the shift to services, at least as a share of the economy if not in absolute terms? or is it a function of where we live (and commute) more than the types of jobs we have?
    • are there externalities? (see another post on that topic!!)
    • is energy big enough for the rise of natural gas (and perhaps in the next decade, wind and solar) represent a positive supply-side shock in macroeconomic terms?
    • does the more diverse mix of sources lead to lower price volatility? would that also have a supply-side effect?

    1. yuy20

      I don't believe a shift to a service economy reduces energy consumption. There may be decreases in larger manufacturing plants and energy consumption there, but probably not for consumers. Consumers' behaviors and search for job types shift with characteristics of an economy. A drastic rise in alternative energy sources may create a shock and decrease the equilibrium price. However, it could also increase the equilibrium price if we see a fall in more popular energy sources such as natural gas.

  10. Mac

    I think this is a very interesting concept of deterring consumers from using energy by lowering efficiency. It sounds like a corrupt way to solve a problem, but it might be necessary. Morally, it is not right to retract technology that can benefit the world. However, I think there is an in-between solution that can mitigate the problem. I believe technology should not be withheld but also our energy consumption must be reduced. In order to do this, we should continue to increase energy efficiency but limit energy consumption by raising prices (maybe a tax?) and lowering the price of renewable energy (subsidy?). This will cause consumers to purchase more efficient products and use them only when it is necessary. Overtime, consumption will be lowered and the government can utilize the revenue from the energy tax towards research and development of alternative energy sources. Also a side note, I found it interesting that airline companies actually reduce the speed of their aircrafts to save more fuel but it adds a significant amount of time to their travel. Airline tickets have not really decreased overtime despite the savings they gain from longer flights. Why do airlines not discount their travel rates since they save money by adding hours to consumer flights?

  11. perelk20

    I would say this is a catch 22, but in the long term I have to think that we need to move towards more energy efficient technology. We have to assume that an increase in population would lead to an increase in consumption as demand for energy, but is this necessarily an issue? With that being said, the long term effects are better with more energy efficient devices. We cannot abandon the progress we have made for the sake of consumption thus far.

  12. liur20

    From my perspective, as the government gets more and more energy efficient, people will find that using certain energy to be cheaper. And because of this efficiency and the lower cost, people will consume more and hence will reach a contradiction from saving and energy efficiency. When using energy is not efficient, more is lost during production and distribution. But when energy is efficient, people will consume more. If the government want to control the use of energy, one of the most direct and efficient way is by putting a tax on it. It is the most fast and quickest way of adjusting the energy

  13. blaira19

    I don't think producing inefficient cars is a solution to this problem. I think the problem is that cars need to last longer. Even though technology is always being updated, and often intrigues the population to stay updated, but if people were to use their car for 10 or more years, then consumption would probably go down. It is unlikely that consumption will go down if car manufacturers keep renovating their cars. Similarly to Apple, they changed the way you can listen to music in your car by removing the aux cord input from the phone and moved more to a wireless generation through bluetooth. The car companies are having to continually update their technology to keep up with the trends in the different markets. I think that consumption will not necessarily decrease as long as new methods of doing the same thing continue to hit the market.

  14. wilkinsonw20

    I do not believe producing inefficient forms of energy production would help solve the proposed postulate. Doing so would only increase inefficiency costing the economy more money and causing the earth harm. So long as we are efficiently producing cleaner energy, increasing energy consumption could be a good thing for a growing economy like our own. In order to reduce energy consumption though, the most immediate answer would be to place a tax on energy. This disincentives over consumption of energy as well as generates revenue for the government. If energy becomes easier to produce, placing a tax that would hold levels near their current costs would not increase the strain on the consumer yet provide revenue for the government while also providing cleaner energy.

  15. hartigank20

    I don’t think it would be a go idea to produce inefficient forms of energy production to decrease consumption. Since higher energy efficiency will increase demand and consumption, we need to look into other ways to control the country’s consumption of energy without making cars less inefficient, because this will negatively impact the environment. I think government intervention could be one way to decrease the demand of energy sources. The government can potentially put taxes on things that are harmful to the environment, called Ecotaxes.

  16. thaia19

    In economic terms, it would likely not be a good idea to produce inefficient forms of energy production to decrease consumption. Instead, if the goal is to decrease consumption, the government could set a limit on how much people could consume. Airlines already use inefficiency to save money - they have their planes travel at slower speeds to reduce fuel consumption. Finding a way to use cleaner energy may solve the problem wihtout forcing people to reduce consumption. Reducing consumption at a time when people are the most dependent on energy and fuel would be extremely disruptive.

  17. motturt20

    Intentionally stagnating energy technologies in an effort to lower consumption is likely not a long term solution to the problem presented, seeing as there are other methods of reducing consumption that do not simultaneously slow technological progress. The government could enact contractionary policies to limit the amount of energy consumed in the economy. Additionally, the principle that higher efficiency causes increased demand applies to all sorts of technological innovations. The counter to that is that the increased efficiency should compensate for the increased demand in the long run, leading to an on the whole better scenario.

  18. Lukas Campbell

    Producing inefficient sources of energy to decrease consumption would not be an ideal solution. The most likely result of this is that people will still consume the same amount of energy they need in order to power their homes, cars, etc., but since the sources are less efficient, consumption of energy would actually increase, and mush more wasted energy from the production side. This contradicts the overall goal of the proposition to decrease consumption. Rather, like many people have said, a faster, more efficient, and less wasteful method of leveling the consumption of nonrenewable energy would be to impose a higher tax on it.

  19. motturt20

    Intentionally stagnating energy technologies in an effort to lower consumption is likely not a long term solution to the problem presented, seeing as there are other methods of reducing consumption that do not simultaneously slow technological progress. The government could enact contractionary policies to limit the amount of energy consumed in the economy. Additionally, the principle that higher efficiency causes increased demand applies to all sorts of technological innovations. The counter to that is that the increased efficiency should compensate for the increased demand in the long run, leading to an on the whole better scenario.

  20. grims20

    No, I do not believe we should produce inefficient means of production to slow energy consumption. The correlation between a rise in energy consumption and an increase in energy efficiency does not mean there is a causation. As technology advanced from 1984 to today, energy consumption naturally rose as more of this technology was produced and used by the common consumer. The advancements in technology led to increased energy efficiency as well; The increased energy efficiency was not the causal effect to the increased energy consumption from 1984 to current day.
    Also, if energy consumption continues to rise to a point where it would be very detrimental to society, the government can put into place laws that limit the amount of energy consumed per household/corporation.

  21. Matthew Marshall

    To make more inefficient cars to decrease energy consumption, the government would be required to pass regulations across the auto industry requiring less efficient cars. A more effective method to decrease energy consumption, however, may be to continue and increase research and development on electric cars devoid of a reliance on fossil fuels. Although electric cars, as of now, are less efficient, through development we may increase the efficiency while exponentially decreasing consumption.

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