Energy Efficiency Leads to Increased Consumption
initiatives and regulations do little to cut energy use and often end
up increasing consumption, according to a new report from CIBC World
"While seemingly perverse, improvements in energy efficiency result
in more of the good being consumed -- not less," said Jeff Rubin, the
chief economist and chief strategist at CIBC World Markets. He finds an
efficiency paradox where consumers have taken the cost-savings gained
through greater efficiency and turned around and spent those savings on
more and bigger energy-guzzling products.
Rubin notes that with the depletion of conventional oil supply
becoming more and more evident and concerns growing over greenhouse gas
emissions, energy-efficiency regulations have been widely viewed as the
answer. Efficiency gains play a prominent role in most government plans
to manage energy consumption, including the latest U.S. Energy Act. But
his work finds that these programs are compounding rather than solving
"The problem is that energy efficiency is not the final objective --
reducing energy consumption must be the final objective to both the
challenges of conventional oil depletion and to greenhouse gas
emissions," he said. "Despite the huge gains in energy efficiency, that
is simply not happening. Instead, energy consumption is growing by ever
The report finds that while energy use per unit of U.S. GDP has
fallen by almost 50 percent since 1975, total energy usage in the U.S.
economy has risen by more than 40 percent in the same period. Most
government efforts to promote greater energy efficiency have been
targeted at the transportation and residential sectors which together
account for half of total energy consumption in the American economy.
"While these initiatives have largely been successful at promoting
large increases in energy efficiency -- almost double the pace in the
rest of the economy -- overall energy usage in the transportation and
residential sectors has risen faster than in the rest of the economy,"
Rubin said. "In short, energy usage has risen fastest where energy
efficiency gains have been the
The situation is the same for carbon emissions where emissions from
the transportation and residential sectors have risen by 40 percent,
double the pace of emission growth in the rest of the economy over the
The report notes that the transportation sector is one of the best
examples of the efficiency paradox. The sector accounts for almost 30
percent of end-use energy consumption and accounts for 70 percent of
oil consumption in the form of gasoline, diesel and jet fuel. The
sector has seen steady and substantial improvements in energy
efficiency since the OPEC oil shocks.
The report is available in PDF format at http://research.cibcwm.com.