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Jevons in the fall

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In the 1860s, some British economists began to wonder if the economy was about to enter a steady-state.  With so much of its economic activity automated with coal-powered steam technologies, surely Britain could rest on its laurels.  Instead of having to dig ever deeper to extract ever more coal – and iron, copper, limestone, etc. – Britain could coast along at its current rates of extraction.

Economist William Stanley Jevons begged to differ.  In his 1865 book, The Coal Question, he correctly argued that the savings made through automation would increase demand in the economy.  This demand would translate into the expansion of existing steam technologies like railways and steamships, as well as in the invention of new steam technologies.  As a result, rather than curbing Britain’s appetite for coal – and other mineral resources – the application of steam technology would result in even more extraction.

This observation gave rise to “the Jevons Paradox;” that any local attempt to save energy will result in an aggregate increase in energy consumption.  This was borne out more recently when, in the aftermath of the oil shocks of the 1970s, car manufacturers worked to make their products more energy efficient.  Lean burn engines, electronic ignition and computer-controlled fuel injection eventually made engines efficient.  Improved suspension, better tyres and streamlined bodies cut fuel use still further.  And the oil industry improved the chemistry of the fuels themselves.  If we had settled for the levels of car ownership seen in the early 1970s, then the improvements would have led to a dramatic fall in demand for petrol.  Instead, the savings on the cost of fuel brought car ownership to the masses.  Indeed, by the early 2000s in the UK, not only was it rare not to have a car at all, but many households had two cars.

The lesson has not been wasted on ecologists concerned with the effect of burning fossil fuels on the environment. While energy-saving has a certain common sense to it – if you don’t burn the carbon then you don’t have to deal with its effects – it is likely to be counter-productive.  If, for example, people’s homes were properly insulated, common sense says that they will use less electricity, gas or oil to heat and power them.  The trouble is that the money they save on heating and lighting will simply be spent on alternative energy-consuming consumption instead.  And so, as Jevons observed, aggregate energy use will grow.

It is for this reason that environmental campaigners have pressed on with the futile attempt to replace fossil fuels with a combination of non-renewable renewable energy-harvesting technologies (NRREHTs), biofuel and nuclear.  This is ill-starred, first, because our dependence on fossil fuels is so high that these “alternatives” have yet to lower our consumption; and second, because they are not truly alternatives when it comes to agriculture, mining, heavy industry and most transport, where eighty percent of fossil fuels are consumed.  Indeed, even in electricity generation, NRREHTs and nuclear power come with some serious drawbacks.  The intermittency of NRREHTs requires storage and back-up technologies which either don’t exist or are so prohibitively expensive that they cannot be deployed.  So long as NRREHTs remained a small proportion of electricity generation, this was not a problem because fossil fuel – particularly gas – generation provided sufficient back-up.  Nuclear, unfortunately, cannot provide back-up rapidly enough to overcome intermittency.  But as NRREHTs became a large enough share – around 50 percent – of electricity generation, unpredictable power outages started to become an unpreventable feature of the system.

This presents a conundrum for campaigners and politicians.  The common sense response to the growing number of intermittency-related power outages around the world would be to cease deploying any more NRREHTs until suitable and affordable storage and back-up can be deployed at scale.  In the meantime, investing in building improvements and retro-fitting existing buildings to make them more energy-efficient appears more effective than undermining the grid with even more destabilising NRREHTs.  But, of course, the Jevons Paradox says otherwise.

The standard view of the economics of energy efficiency is that the energy – and money – saved will simply be spent on other energy-using goods and services.  As a result, instead of lowering our demand for energy, efficiency causes it to rise.  And so deploying more NRREHTs would seem to be better than investing in energy efficiencies.  Unfortunately, this is not true either.  NRREHTs have failed to meet their primary objective for the same reason – instead of using the additional renewable energy to replace fossil fuels, NRREHTs have merely added to our energy consumption.  Meanwhile, fossil fuel consumption continued to grow:

 

If – hypothetically – we had somehow managed to halt the growth in fossil fuel consumption at 2015 levels, then the energy saved would have been more than the total generated by NRREHTs.  Indeed, the only two recent occasions when our energy consumption fell were the result of the depression following the 2008 crash and the pandemic restrictions and lockdowns of the last twelve months.  But even these shocks resulted in the loss of just a fraction of the energy we would have to forego to wean ourselves off fossil fuels.

This would imply that the only way of lowering our overall energy consumption is through the kind of economic management and restrictions on liberty that are only possible in authoritarian states.  That is, we would need to be forced against our collective will to cut our consumption of goods and services until we reach a level considered sustainable – most likely requiring us to accept a standard of living akin to that in contemporary sub-Saharan Africa or of England in the early nineteenth century.  Good luck with that!

There is though, an alternative way of viewing our situation, derived from the 1972 computer models of The Limits to Growth:

In the modelling, if industrial civilisation continued to grow as it had prior to the 1970s, it would reach a limit sometime around the turn of the twenty-first century.  This would first be experienced as a decline in resources, followed by declining output, consumption and food.  Births would initially fall while deaths rose dramatically, leading to a big decline in population after 2050.

As it turned out, growth slowed from the 1970s, so that the various peaks were delayed until the 2020s.  For example, peak oil extraction occurred in 2018, and was already causing economic disruption prior to the arrival of SARS-CoV-2.  More worrying but less obviously, the energy cost of energy – the amount of energy required to obtain energy – has been rising remorselessly since the 1970s, so that in 2021 we find ourselves on the edge of a net energy cliff:

 

Because NRREHTs deliver less than the 20:1 energy return needed to maintain an industrial civilisation, they cannot save us from our predicament.  Moreover, because they are a poor substitution for liquid fuels, they are being used inefficiently – for example, powering electric cars instead of trains and trams.  The killer blow, however, is that they are “non-renewable” precisely because fossil fuels are required at every stage in their manufacture, transport, construction, operation and maintenance.

The growth of industrial civilisation was driven not so much by access to energy resources, than by the growth in energy available for productive work.  For most of human existence, there was barely enough energy with which to subsist; meaning that most people had to work producing food.  Even as recently as 1901, more than 25 percent of the population worked the land.  Today it is less than 2 percent; freeing a massive pool of labourers and consumers to generate the modern ungrounded globalised economy.

Unlocking fossil fuels meant opening up the biggest battery we have ever known – millions of years of stored solar energy; allowing technologies to rapidly grow from the Newcomen steam engine to the moon landings in just 257 years.  As if by magic, where medieval sailors spent months traversing oceans, people today fly across them in a matter of hours.  In the eighteenth century it would have taken 12 hours to get a message from London to Birmingham.  Today I can have an instantaneous Zoom or Facebook conversation with someone in California or Tasmania, and consider it normal.  As a child, I remember late February and early March as a particularly unpleasant time for food – the hangover from the medieval “lean period,” when we were down to the last of the autumn harvest and no new crops were available.  Today I barely notice that my internet-ordered, delivered shopping includes salad vegetables from southern Europe, fish packaged in China and fruit from South America.  Such are the minor miracles at the high-water mark of the industrial age.

If only oil was an infinite resource, we might have added even more minor miracles to our achievements.  But oil is a finite resource which took millions of years to create… and we have burned our way through most of the accessible resource in just three centuries.  It is true that there is probably as much oil beneath the ground as we have used in the industrial age.  And it is for this reason that so many people buy into the International Energy Agency’s belief that global oil consumption will continue to rise until 2050.  After this – they claim – the switch to electric vehicles and NRREHTs will result in “peak oil demand,” and oil extraction will fall.

The IEA forecast is what you get when you listen to neoclassical economists for too long.  Intimately bound up with the oil age, this version of economics has only had to face limits on brief, and at least partially artificial, occasions.  As a result, it assumes that whatever resources humans require will be available where, when and in whatever quantities they are needed.  This is the fallacy of infinite growth on a finite planet; and it comes to grief on the low-hanging fruit problem.

Not all resources are equal.  There was a huge difference in the energy required to dig coal out of deep mines far below the North Sea seabed in the late twentieth century, compared to that required to harvest the seams jutting from the hillside above the Severn Valley in the early eighteenth century.  In the same way, Colonel Drake exerted relatively little effort to get at oil 70 feet beneath the ground in Pennsylvania, when compared to a platform in the deep waters of the Gulf of Mexico, recovering oil from several miles beneath the seabed.

Yes, there is a lot of oil beneath the ground; and because of the energy required to recover it, that is where it is going to stay.  Today, almost all of the remaining accessible oil fields are in decline; and we have run out of new deposits to replace them with.  And so, whether the economists and the IEA forecasters like it or not, peak oil extraction has already happened.  Indeed, conventional oil extraction peaked in 2005; triggering the series of events which led to the banking collapse of 2008.  Extraction continued to grow between 2005 and 2018 as a result of the eye-wateringly expensive US shale deposits; conveniently financed via quantitative easing programmes.  In the real world though, the price of oil cannot find the “goldilocks” spot where oil companies are profitable at a price consumers can afford:

This is how the limits to growth and the net energy cliff play out in practice.  There is still plenty of profitable oil to be extracted; but it is almost all from fields which are already depleting.  Comprising less than five percent of primary energy, NRREHTs cannot hope to close – or even dent – this gap.  Nuclear power offers a bigger energy return, but only at a price that is beyond consumers.  And so we find ourselves in a shrinking energy situation that Jevons only saw in the far distant future.

The Jevons Paradox assumes an ever growing amount of energy available for productive work.  But that has not been our experience in the twenty-first century.  As the energy available to us for productive work declines, we can but wonder whether our descent will be as rapid as our earlier ascent:

For consumers, energy – food, heat and light – is largely non-discretionary.  As a result, people will continue to pay for non-discretionary energy for as long as their incomes allow it.  This means, however, that the previously larger discretionary spends will have to be reined in.  Indeed, for those at the very bottom of the income ladder, this had already begun back in the 1980s; and accelerated after 2008.  The growth of foodbanks and gig economy working are manifestations of an economy in energy-decline: the former because those at the bottom can no longer afford previously non-discretionary essentials, the latter because corporations seek to remain profitable by slashing labour costs.

As the energy available to us continues to decline, this process can only grow.  Even workers nominally paid the Minimum Wage find themselves struggling to meet ever increasing non-discretionary costs.  For example, despite the damage done to the economy in response to the pandemic, government – local and national – is increasing taxes, energy companies are raising prices, and transport companies are raising fares.  Add to this the anticipated spike in oil prices once (or if) the economy picks up, and we are looking at a massive switch from discretionary to non-discretionary spending across the economy.

Whereas in a growing economy, energy-efficiency measures result in increased discretionary spending – the more energy we save, the more energy we use – in a declining economy, targeted energy-efficiencies might cushion an otherwise unbearable blow; one that has already given rise to Brexit and Donald Trump, and may well result in even darker forces being unleashed in future.  After all, set aside ideological dogma and you find that all revolutions are ultimately the result of too many people having empty bellies.

In the immediate future, masses of people are going to be unemployed or under-employed, simply because the rising price of essentials will divert spending away from the – much larger – discretionary regions of the economy.  At the same time, those at the bottom of the income ladder – including most of the newly unemployed – will be unable to afford basics like sufficient food and heating.  So targeted energy efficiencies aimed at this part of the population would result in at least a bearable standard of living rather than the increased consumption of decades past.  For example, instead of promoting electric cars – which most people cannot afford – through grants and tax breaks, governments should be electrifying and subsidising public transport.  In the same vein, rather than continue subsidising even more destabilising NRREHTs without the required storage and back-up, government subsidies should be targeted at properly insulating low-income housing.

The Jevons Paradox will, for now, apply to those sections of the population whose incomes have continued to grow in the years since 2008.  But with ever more people left hungry and shivering in the dark, its deployment as a reason not to invest in energy efficiency will likely be regarded as yet another excuse not to address the growing chasm between rich and poor.  It is certainly true that the subsidised, NRREHTs-based green new deal proposals would allow the already wealthy to dine on taxpayer subsidies while the poor are required to pay even more for their energy.  It is also true that beneficiaries will use the savings for even more discretionary consumption.  But a different politics which seeks first to mitigate poverty can meet the duel aim of supporting the most needy without the increased discretionary spending that results in even more greenhouse gas emissions…  And as our total energy declines, ever more people are going to fall into the category which needs energy efficiencies.

As you made it to the end…

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