Why energy efficiency is bad for the environment - example of the electric car

[It amazes and baffles me why so many eminent economists think energy efficiency is the answer to the global challenge of a warming planet. Energy efficiency, as a solution for global warming, violates all the basic principles we learned in Economics 101. Let me explain:

I believe it is a generally accepted principle that any increase in living standards comes only with an increase in productivity. Throughout history an increase in living standards has always resulted in an increase in energy consumption, because consumers can afford more physical good such as cars and appliances. They can eat also afford richer diets of meat and travel more.

Simply put, productivity means more units of output for every unit of input. Inputs are primarily made up of raw material, labour and energy. Outputs can be anything from physical goods such as automobiles to every day services such as hair cuts.

The electric car as being touted as one of the saviors from the environmental damage caused by the internal combustion engine. There is no question that an electric vehicle will consume far less energy than a traditional fossil fuel driven car. And pound for pound basis it will produce far less CO2, than today’s gas guzzlers, even if the electricity comes solely from coal fired power plants. So how can electric vehicles be bad for the environment??

Simple economics. The electric vehicle is an example of increased productivity through energy efficiency. Once car manufacturers reduce the cost of batteries as the industry scales up the electric car will far cheaper to run and operate than today’s vehicles. In terms of miles per Watt the electric vehicle is far more efficient than today’s automobiles. This means that many more millions of families around the world will now be able to afford a car for the first time in their lives. India’s Tata Nano is a great example of a low cost vehicle for the masses – but given the price of gasoline (and its pending shortage) the biggest cost of the Nano over its lifetime will be in its fuel consumption and not its capital cost. But imagine if the Tata was an electric vehicle – then that huge potential of fuel cost is eliminated.

The automobile is the standard bearer of an economy’s move from an agrarian to a modern industrial society. Electric vehicles will be especially attractive to countries which have to import most of their oil, as they can use their dirty coal plants to power the millions of electric vehicles.

So while energy efficiency through electric vehicles may reduce the overall CO2 emissions in rich industrialized nations (assuming there is a one to one replacement of gasoline powered cars with electric vehicles) its decreased cost will enable millions of more families in the developed world to buy cars. As a result the absolute volume of CO2 emissions will increase over time as most of the electric power for these vehicles will come from coal plants. As many of you know this phenomena of energy efficiency is called the Jevons paradox or the Khazzoom-Brookes postulate. Simply stated energy efficiency at the micro level paradoxically increases energy consumption at the macro level. Even if we implement a substantial carbon tax, the efficiencies of the electric vehicle will still make it affordable for many millions of families around the world to buy a car for the first time.

It is not only electric vehicles, but data centers, computers and host of other products and services where we see this phenomena at play. The narrow focus on energy efficiency in any particular field may save money for an individual or company, but the bottom line is that increased energy efficiency means increased productivity and ultimately greater affordability for millions around the world. As a result overall energy consumption will increase as millions more can afford these products and services. In turn, if most of this electricity comes from coal fired plants, the global volume of GHG emissions will invariably rise.

So what is the answer? Are we to throw are hands up in despair that there is no solution to climate change?

No. We have to rethink the problem. The biggest challenge facing the planet is not energy consumption, but the type of energy we consume. If all our energy came from renewable sources than any growth in demand for energy as a result of inevitable growth in productivity will not result in a concomitant increase of GHG emissions. So rather then designing products and services to be more energy efficient, we should instead focus on how these devices can operate using solely renewable energy.

The biggest challenge with renewable energy is its unreliability. Energy storage is part of the solution, as well continent spanning electrical grids. But, in addition, I believe we need a sustained research effort in designing products and services that can still be just as reliable as today, but powered solely by local renewable energy. In the Internet and computing world this is relatively easy – in Canada for example we are deploying the world’s first zero carbon Internet/cloud where all the computing and routing nodes are powered solely by local renewable resources. Again the significance of this approach is that GHG emissions will not increase as energy consumption increases when the network scales to meet growth in demand for new services.

In terms of the electric car I have proposed “mobile electric vehicle charging” as a solution where solar panel and windmills along the roadside or at drive through fast food restaurants are used to recharge vehicles as they drive by, or waiting in a queue at a traffic light or take out counter. Rather than using dirty electricity from the grid, this approach insures electric vehicles are powered only by renewable energy. Its also a technology that takes advantage of the North America drive through life style, as opposed to some other hair shirt approaches through environmental denialism. For more details please see http://green-broadband.blogspot.com/2010/04/green-investment-opportunity-for-small.html

If we have any hope of addressing climate change we have got to start addressing the real problem – GHG emissions, not energy consumption. As quickly as possible we need to eliminate coal fired power stations and switch to renewable energy. But using renewable energy means rethinking our entire energy architecture. This not only entail changes at the production side with smart grids etc, but also changes at the consumption side in terms of devising solutions that can use such unreliable power.

Think carbon, not energy.




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