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The Jevons Paradox – the basis of future taxation strategy?
We, at the national Productivity Centre, aim to help organisations reduce their energy costs. This is ‘a good thing’ as it helps them save money and it helps save vital resources. Or does it?
The Jevons Paradox (or Jevons Effect) is a proposition in the field of economics that suggests that, as technology increases the efficiency with which a particular resource is used (in this case, energy), the use of that resource tends to increase! This is because the increased efficiency lowers the relative cost of the resource which, in turn, increases demand. This fuels economic growth which further increases demand. So the more efficiently we use energy, the more (in the medium term) we consume.
If Jevons is right, some way of maintaining or increasing price will have to be found if we are to reduce overall energy usage. This is one of the reasons why governments are looking at energy taxes as a means of ‘artificially’ keeping energy costs high in order to moderate demand.
Note 1: The proposition was first put forward by William Stanley Jevons in his book The Coal Question published in 1865.
Note 2: This does not mean that individual organisations should not try to increase their own energy efficiency. After all they are in a competitive position with other organisations within their own sector who are presumably also aiming at increased energy efficiency. The paradox applies to overall – national, regional and global use.
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