The Vast Benefits Of Energy Efficiency: New York Times Op-Ed Confuses The Facts

CREDIT: International Energy Agency

The New York Times has published a uniquely misleading op-ed, “The Problem With Energy Efficiency.”

How misleading is it? Consider the cornerstone claim by the authors:

The growing evidence that low-cost efficiency often leads to faster energy growth was recently considered by both the Intergovernmental Panel on Climate Change and the International Energy Agency. They concluded that energy savings associated with new, more energy efficient technologies were likely to result in significant “rebounds,” or increases, in energy consumption. This means that very significant percentages of energy savings will be lost to increased energy consumption.

The I.E.A. and I.P.C.C. estimate that the rebound could be over 50 percent globally.

Let’s set aside for now that first misleading statement. There is no “growing evidence that low-cost efficiency often leads to faster energy growth.” To the extent that there is any evidence that broad efficiency measures actually lead to faster energy growth than would have occurred without those measures, both the IEA and IPCC clearly reject it, as we’ll see.

Based on the New York Times piece, however, you’d think that the IPCC and the IEA were quite devastated by their analysis of the rebound effect and had become sour on energy efficiency as a climate-mitigation tool for policymakers. In fact, the reverse is true. Based on their review of the literature, both the IEA and IPCC strongly endorse energy efficiency measures!

Here is what IEA Executive Director Maria van der Hoeven said on Wednesday in a news release about the IEA’s Energy Efficiency Market Report:

“Energy efficiency is the invisible powerhouse in IEA countries and beyond, working behind the scenes to improve our energy security, lower our energy bills and move us closer to reaching our climate goals.”

That same IEA news release notes that “in the IEA scenario consistent with limiting the long-term increase in global temperatures to no more than 2 degrees Celsius, the biggest share of emissions reductions — 40% — comes from energy efficiency.” The report itself provides data “confirming energy efficiency’s place as the ‘first fuel.'”

As for the IEA report from last month the op-ed is referencing, “Capturing the Multiple Benefits of Energy Efficiency,” the central conclusion on the rebound effect was, “Considering multiple benefits also has important implications for unravelling one of the persistent challenges in energy efficiency – the rebound effect – revealing that it often signals a positive outcome in terms of achieving broader social and economic goals.”

The IEA concluded that “the uptake of economically viable energy efficiency investments has the potential to boost cumulative economic output through 2035 by USD 18 trillion,” which is larger than the current size of the U.S. economy! The point of the report is that some of the rebound effect is actually a good thing socially and economically — and makes efficiency vastly more cost-effective than anyone thought.

That IEA report found the co-benefits from energy efficiency upgrades equal — and often exceed — the energy savings. When the value of productivity and operational benefits were factored into “traditional internal rate of return calculations, the payback period for [industrial] energy efficiency measures dropped from 4.2 to 1.9 years.” Payback time was cut in half.

Hence the Executive Summary explains:

Where energy savings are “taken back” in the achievement of health benefits, poverty alleviation, or improving productivity, the rebound effect can be viewed as having a net positive outcome, amplifying the benefits of the energy efficiency intervention.

In short, the IEA report finds that the rebound effect can often help make energy efficiency investments vastly more cost-effective, which in turn justifies society making far deeper efficiency investments. So it is astonishingly disingenuous for the NY Times to cite that report to suggest that the IEA believes the rebound effect fatally undermines the case for energy efficiency policies.

As for the IPCC, their Working Group III report, “Mitigation of Climate Change,” also surveys the muddied literature on the subject. A key point they make is that “rebound effects are context‐specific, making it difficult to generalize on their relative size and importance.” The IPCC reports that:

For household‐efficiency measures, the majority of studies show rebounds in developed countries in the region of 20-45% (the sum of direct and indirect rebound effects), meaning that efficiency measures achieve 65-80% of their original purposes.

As for poorer countries, the report notes that “there is evidence to support the claim that rebound effects can be higher in developing countries” but rather than giving firm numbers here, the IPCC simply acknowledges “there is considerable uncertainty of the precise scale of rebound effects in developing countries with more research required.”

Let’s turn to the IPCC’s “Summary for Policymakers” on the Mitigation report. That represents the key widely-agreed-upon takeaways from the full IPCC report that policymakers should understand. Indeed, it’s the only part of the report that the IPCC member governments officially sign off on line for line. Here’s what it concludes on the subject of the rebound effect:

“There is general agreement that rebound effects exist, whereby higher efficiency can lead to lower energy prices and greater consumption, but there is low agreement in the literature on the magnitude.”

That’s it. It is again absurdly misleading for the New York Times to write that the “I.P.C.C. estimate[s] that the rebound could be over 50 percent globally.” It is doubly misleading to do so in an op-ed whose primary, if not sole, purpose is to argue that energy efficiency policies are worthless as climate policies.

Far from souring on energy efficiency, the IPCC Summary Report concludes (emphasis in original):

The development of portfolios of energy efficiency policies and their implementation has advanced considerably. Building codes and appliance standards, if well designed and implemented, have been among the most environmentally and cost-effective instruments for emission reductions (robust evidence, high agreement). In some developed countries they have contributed to a stabilization of, or reduction in, total energy demand for buildings. Substantially strengthening these codes, adopting them in further jurisdictions, and extending them to more building and appliance types, will be a key factor in reaching ambitious climate goals.

Some final points on the rebound effect. First, many recent claims that it is higher than previously expected — including claims cited by the IEA –are based on research that is deeply flawed.

Second, one reason calculating the full rebound effect for technologies like advanced LED lighting (a major focus of the NYT op-ed) is that some energy-saving aspects of the technology are very difficult to pin down. Reports suggest that one reason car ownership and vehicle miles traveled and hence transportation oil consumption has reversed its steady uphill march in this country — especially evidenced among Millennials — is the rapid embrace of social networking and information technology. In short, Millennials in particular appear to be spending more time in front of (LED) screens than in front of vehicle dashboards. So has the LED lighting revolution helped saved energy in the transportation sector? Very possibly — and that’s why claims that LEDs aren’t a net energy saver should be viewed with a great deal of skepticism.

The New York Times op-ed ends, “if we are to make a serious dent in carbon emissions, there is no escaping the need to shift to cleaner sources of energy.” That is one of the few inarguable statements in the piece, which of course is why we need a carbon price to accelerate that shift in time to avoid catastrophic climate change.

But energy efficiency is a cleaner source of energy, and that’s why the IEA calls it the “first fuel.”