Can energy efficient technology harm the environment?

The answer is yes according to this recent article in The Economist.

SOLID-STATE lighting, the latest idea to brighten up the world while saving the planet, promises illumination for a fraction of the energy used by incandescent or fluorescent bulbs. A win all round, then: lower electricity bills and (since lighting consumes 6.5% of the world’s energy supply) less climate-changing carbon dioxide belching from power stations.

Well, no. Not if history is any guide. Solid-state lamps, which use souped-up versions of the light-emitting diodes that shine from the faces of digital clocks and flash irritatingly on the front panels of audio and video equipment, will indeed make lighting better. But precedent suggests that this will serve merely to increase the demand for light. The consequence may not be just more light for the same amount of energy, but an actual increase in energy consumption, rather than the decrease hoped for by those promoting new forms of lighting.

The idea is that the cheaper lighting might so increase lighting purchases and energy consumption that energy use might rise.

Now this possibility interested mathematician Terence Tao and he wrote up a little example on Buzz. He then elaborated and that is when I chimed in (see this Buzz thread). My point was that solid-state lamps were hardly going to be a competitively priced good. Instead, they would likely, initially at least, be sold a patent holder at a monopoly price. Consequently, in Tao’s example, no dire increases in energy costs would arise. Nonetheless, as you can see from the exchange, there were some cases that could produce that and also some interesting differences in our language.

Anyhow, I have written up a short note that demonstrates the interesting things that might arise. In particular, a tax can be used to mitigate the problem but also that the tax has another cost — it reduces monopoly profits and hence, the incentives to innovate for these things. That said, I think it requires some more work to see if that result would stick. As Suzanne Scotchmer has shown, these models are subtle. Anyhow, if anyone wants to work through this, please feel free to link to any results in the comments.

Nonetheless, one thing is for sure. This conclusion in The Economist:

So, for those who truly wish to reduce the amount of energy expended on lighting the answer may not be to ban old-fashioned incandescent bulbs, as is the current trend, but to make them compulsory.

is deplorably wrong!

A Note on Environmental Taxes and Monopoly Pricing

5 thoughts on “Can energy efficient technology harm the environment?”

  1. The Economist article sounds crazy. There is a big literature on the “rebound effect” – the change in energy use following an energy saving innovation. For most consumer innovations typical rebound effects in the literature are on the order of 30%. In other words net energy savings are 70% of the reduction due to the innovation itself. Actual increases in energy use as a result of an energy saving innovation are rather unlikely in this case though they may be possible in some situations.


  2. The article in The Economist is ridiculous. The paper it’s based on basically just says that expenditure on lighting has been pretty much constant at 0.72% of GDP since 1700.
    If that relationship holds in the future, we can conclude three things (allowing only one variable to change at a time):

    If GDP increases and energy price stays the same, lighting energy usage will increase.
    If GDP is constant and energy prices rise or fall, lighting energy usage will fall or rise respectively.
    If GDP and energy prices stay the same, but lighting efficiency rises, then lighting energy usage will stay the same, but consumption of lighting will increase.

    It’s simply not possible to conclude from the paper that increased lighting efficiency will lead to increased lighting energy usage.
    Note that LEDs are not really very efficient, the best that are currently available only just match the efficiency of a moderately sized (40 watt) fluoro tube, at about 100 lumens pre watt. LEDs can be more efficient than compact fluoros, which might achieve only about 50 lumens per watt. But LEDs don’t get anywhere near the efficiency of sodium street lights, which run at up to 200 lumens per watt, and have been around for at least 50 years.
    In the developed world, swapping an incandescent light for an LED will result in reduced energy consumption, but constant lighting consumption, because we’re pretty much at the point of saturation (our demand for lighting is fully satisfied at current prices).
    In the developing world (say rural China), where lighting demand is not fully satisfied at current prices, LEDs are likely to result in increased lighting consumption, but constant lighting energy consumption at constant GDP.
    It might be possible to argue that increased lighting energy consumption in China, due entirely to growth in GDP, is going to offset the reduced lighting energy consumption in the west, but that’s an argument that hasn’t been presented.
    I’ll conclude in the same vein as I opened: the article in The Economist is a ridiculous mis-representation, and draws unwarranted and ridiculous conclusions.


  3. I thought the Economist article was very poor.  It does not say that increased lighting efficiency will lead to increased energy use.  It just says that energy use will increase despite increased lighting efficiency. Over two decades!
    Well, duh! It would be interesting to know if the more efficient lighting by itself (ceteris paribus) would cause increased energy use.  But the Economist doesn’t bother to tell us that.
    I hope the paper itself was better than this.  Since it was written by physicists – not economists – it probably wasn’t.


  4. Joshua, the conclusion in The Economist article sounds pretty good if you carry through their logic.  If this new technology makes lighting cheaper, we will light more areas, more often, thus the net result may be an increase in energy use compared to what might have been without the new technology. Thus, if we make incandescent bulbs compulsory (ban new energy efficient technology), lighting will stay relatively expensive, and people, business and industry will illuminate less area for less time, using less energy than in the alternative scenario (but more energy per lumen/hour). It is simply restating Jevon’s paradox, and argues that over the long run improved technology typically results in a rebound effect greater than 100% (plenty of linked papers at the rebound effect wikipedia article). This paper analyses an experiment in Indian villages involving solar powered lighting, and concludes that: High positive rebound implies that efficient technology, unless supplemented by appropriate pricing policy, will not be successful in containing demand


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