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Chapter 5
In Search of Solutions II:
Efficiency Improvements
Definition of Efficiency
Technological efficiency (e) is defined as the ratio of
“amount of benefit (B) per unit limited resource (R)”, i.e.,
Β
e
R
Examples of benefits (B):
• work done by machines
• food produced by industrialized agriculture
• years of life extended by high-tech medicine
• material affluence, expressed as per capita GDP
Examples of limited resources (R):
• non-renewable or renewable fuels and minerals
• arable land
• waste-absorption capacity of the environment
• time (labor) and money
Reducing the Use of Limited
Resources by Increasing Efficiency
The use of a limited resource (R) can be reduced by increasing
efficiency (rearrange the e=B/R equation):
B
R
e
Resource use (R) declines with time
ONLY IF
efficiency (e) improvements outpace
the growth in the demand for benefits (B),
i.e., e increases FASTER than B.
Rising Material Affluence
20000
18000
Per Capita GDP (1985 US$)
16000
USA
UK
14000
Germany
12000
France
Japan
10000
8000
6000
4000
2000
0
1800
1850
1900
1950
2000
Year
Source: Huesemann and Huesemann (2008)
Causes of Economic Growth
There are at least three important aspects worth considering
to understand why continuous progress in science and
technology has played a key role in rising living standards
(per capita GDP) in industrialized nations:
• The nature and drivers of technological innovation
• The rebound effect in response to efficiency improvements
• Factor analysis from neoclassical growth theory
The Nature and Drivers of
Technological Innovation
Modern technologies are nothing more than highly efficient
processes designed to convert large quantities of energy and
mineral resources into a wide variety of products and services
while minimizing the input of human labor.
Science and technology have increased affluence by:
• substituting capital and energy for labor, thereby increasing
labor productivity which translates into rising per capita
production and consumption.
• creating a large number of new products and services,
thereby opening up new avenues for consumption.
• continuously increasing efficiencies, thereby decreasing the
costs of goods & services, thus stimulating their consumption.
Rebound Effect or
Jevons’ Paradox
Efficiency gains do not necessarily decrease the use of
limited resources but rather stimulate their consumption
as a result of efficiency-induced price reductions.
This phenomenon is called “rebound effect” or Jevons’
Paradox, since it was first observed by British economist
Stanley Jevons in 1985. (Note: He found more efficient steam
engines will increase rather than decrease demand for coal).
Example: Increases in automobile fuel efficiency will result
in more driving due to lower fuel consumption cost, thereby
reducing originally predicted fuel savings.
The rebound effect is directly or indirectly responsible for
a large increase in per-capita consumption/affluence.
The Contribution of Technological
Change to Economic Growth
This growth accounting equation has been used by neoclassical
economists to determine how much technological change (TC or
TFP), relative to increases in capital (K) and labor (L), is
responsible for the total growth in economic output (Q):
% Q growth = % L growth + % K growth + TC
Source: Huesemann and Huesemann (2008)
Efficiency Improvements
and Limited Resources
Science and technology has caused growth in material
affluence (B) as well as continuous improvement in efficiencies
(e).
According to the equation R=B/e, the use of limited
resources (R) will only decline with time if
technological efficiency improvements (e) occur faster
than the technology-induced growth in (material) benefits (B).
To determine whether efficiency improvements have reduced
the use of limited resources, historical data are analyzed to
evaluate whether efficiency improvements have occurred
faster than the respective demands for benefits.
Energy Efficiency
& Total Energy Use
TPEU, ee, and GDP (1973=100%)
220
200
TPEU
180
ee
160
GDP
140
120
100
80
60
1970 1975 1980 1985 1990 1995 2000 2005
Year
Source: Huesemann and Huesemann (2008)
Automobile Fuel Efficiency
& Total Automobile Fuel Use
TFE, ef, and TPKm (1974=100%)
180
170
TFE
160
ef
150
TPKm
140
130
120
110
100
90
80
1970
1975
1980
1985
1990
1995
2000
Year
Source: Huesemann and Huesemann (2008)
Lighting Efficiency &
Total Energy Use for Public Lighting
TEUL, el, and LS (1923=100%)
1000
TEUL
el
LS
100
10
1
1900
1920
1940
1960
1980
2000
Year
Source: Huesemann and Huesemann (2008)
Efficiency of Materials Use
& Total Material Requirements
TMR, em, and GDP (1975=100%)
170
TMR
160
em
150
GDP
140
130
120
110
100
90
80
1970
1975
1980
1985
1990
1995
Year
Source: Huesemann and Huesemann (2008)
Efficiency of Carbon Use
& Total Atmospheric CO2 Emissions
CARBON, ec, and GDP (1980 = 100%)
220
200
CARBON
ec
180
GDP
160
140
120
100
80
1975
1980
1985
1990
1995
2000
2005
Year
Source: Huesemann and Huesemann (2008)
Labor-Saving Technology
& Number of Hours Worked
AHW, LP, & PC-GDP (1870 = 100%)
1400
1200
Annual Hours Worked
Labor Productivity
1000
GDP per Person
800
600
400
200
0
1850
1900
1950
2000
Year
Source: Huesemann and Huesemann (2008)
Medical Progress
& Health Care Costs
• Health care spending in the United State is expected
to reach 20% of GDP by 2015.
• High-tech medicine is believed to be responsible for
50% to 85% of the growth in health care costs.
Medical technology increases health care costs because of:
• greater availability and accessibility of tests and treatments due to
efficiency-induced cost reductions (rebound effect).
• hope for new cures which, if successful, become permanent needs.
• prolonging life as long as possible, no matter what the costs.
As long as demand is unlimited, cost will continue to escalate
despite efficiency improvements in health care delivery.
Inherent Limits
to Efficiency Improvements
There are inherent thermodynamic limits to energy conversion
efficiencies (2nd law of thermodynamics).
The supply-side energy efficiency, currently at 37%, can be
increased by at most two-fold.
The end-use energy efficiency can probably be increased by
two to three-fold.
Total energy efficiency can be increased by five-fold.
There are limits to improving the efficiency of materials use
since one cannot indefinitely “angelize” the economy.
There are limits to improving labor productivities since service
sector and professional jobs cannot be mechanized.
Unintended Consequences
of Efficiency Solutions
Increased vulnerability to resource shortages.
The problem of reverse adaptation: Efficiencies (means)
become ends in themselves.
Optimization of technical efficiencies strengthens materialistic
values and leads to neglect of non-material values.
Excessive focus on efficiency improvements may destroy the
quality of life.
• Greater exploitation of workers and the environment (e.g., assembly line).
• Positive bias towards the quantifiable, leading to neglect of cultural or personal
values such as fairness, equity, freedom, creativity, faith and aesthetics.
• Strong focus on rational problem solving while ignoring subjective viewpoints,
potentially creating a world devoid of love and empathy.
Conclusions
Resource use (R) declines with time only if efficiency (e)
improvements outpace the growth in the demand for benefits
(B), i.e., e increases FASTER than B.
Historical data demonstrate that many efficiency
improvements have not been able to reverse the growth in
the use of limited resources.
There are inherent thermodynamic and practical limits to all
efficiency improvements. Therefore, it is impossible to have
continued economic growth without increased use of limited
natural resources and associated pollution.
The are numerous unintended side-effects to efficiency
solutions. Society must avoid the “reverse adapation” problem
by first defining societal values and goals BEFORE using
technology with better efficiency to achieve them.