Khazzoom-Brookes postulate

In the 1980s, the economists Daniel Khazzoom and Leonard Brookes independently put forward ideas about energy consumption and behavior that argue that increased energy efficiency paradoxically tends to lead to increased energy consumption. In 1992, the US economist Harry Saunders dubbed this hypothesis the Khazzoom-Brookes Postulate, and showed that it was true under neo-classical growth theory over a wide range of assumptions. [Harry D. Saunders, "The Khazzoom-Brookes postulate and neoclassical growth." "The Energy Journal", October 1, 1992.]

Explanation

In short, the postulate states that "energy efficiency improvements that, on the broadest considerations, are economically justified at the microlevel, lead to higher levels of energy consumption at the macrolevel." [http://technology.open.ac.uk/eeru/staff/horace/kbpotl.htm Does Energy Efficiency Save Energy: The Implications of accepting the Khazzoom-Brookes Postulate.] ] This idea is a more modern analysis of a phenomenon known as the Jevons Paradox. In 1865, William Stanley Jevons observed that England's consumption of coal increased considerably after James Watt introduced his improvements to the steam engine. Jevons argued that increased efficiency in the use of coal would tend to increase the demand for coal, and would not reduce the rate at which England's deposits of coal were running out.

Like Jevons Paradox, the Khazzoom-Brookes Postulate is a deduction that is largely counter-intuitive as an efficiency paradox. When individuals change behavior and begin to use methods and devices that are more energy efficient, there are cases where, on a macro-economic level, energy usage actually increases." The effect of higher energy prices, either through taxes or producer-induced shortages, initially reduces demand but in the longer term encourages greater energy efficiency. This efficiency response amounts to a partial accommodation of the price rise and thus the reduction in demand is blunted. The end result is a new balance between supply and demand at a higher level of supply and consumption than if there had been no efficiency response."

Increased energy efficiency can increase energy consumption by two means. Firstly, increased energy efficiency makes the use of energy relatively cheaper, thus encouraging increased use. Secondly, increased energy efficiency leads to increased economic growth, which pulls up energy use in the whole economy.

The work done by Khazzoom and Brookes began after the OPEC oil crises of 1973 and 1979, when demand for more fuel-efficient automobiles began to rise. Although greater fuel efficiency was achieved for each automobile on average, overall consumption has continued to increase." The OPEC oil shocks spawned huge improvements in energy efficiency, particularly insofar as oil was concerned. But three decades later, we find that the net effect of all of those efficiency initiatives has been to increase the world’s appetite for crude. While oil per unit of GDP has fallen impressively in large energy-consuming economies like the United States, total oil consumption, and indeed, total energy consumption, continue to grow by leaps and bounds. The increase in energy usage has dwarfed the gains in economic efficiency. Hence, instead of capping energy demand, what we observe is that improvements in energy efficiency lead to ever and ever-greater levels of energy usage." [ [http://research.cibcwm.com/economic_public/download/snov07.pdf "The Efficiency Paradox" by Jeff Rubin, November 27, 2007.] ]

ee also

*Jevons paradox
*Energy conservation
*Rebound effect (conservation)

References

External links

"The Economics of Energy Efficiency": Chapter 3 of the Second Report (Session 2005-2006) of the Committee on Science and Technology of the UK House of Lords. http://www.publications.parliament.uk/pa/ld200506/ldselect/ldsctech/21/2106.htm