Why Energy Efficiency Does Not Always Reduce Greenhouse Gases

It is well known that Oregon has developed ambitious goals for reducing greenhouse gases. House Bill 3543 codifies Governor Ted Kulongoski’s greenhouse gas reduction goals: to halt the growth of greenhouse gas emissions by 2010, to reduce emissions to a level 10% below the 1990 levels by 2020, and by 2050 to achieve greenhouse gas levels 75% below 1990 levels.

One of the main actions taken to reduce emissions is to reduce energy consumption through energy efficiency projects. Publicly funded state agencies and non-profits are promoting a variety of strategies, including replacing incandescent bulbs with compact fluorescent lights (CFLs), facilitating efficiency upgrades on businesses and industries, and providing incentives for upgrades like new windows, weather stripping and energy saving appliances. The Energy Efficiency Working Group of the Governor’s Global Warming Commission plans on raising a pot of $60 billion dollars to spend on efficiency upgrades on existing homes and businesses in the next few years. The Energy Trust of Oregon is spending $62.7 million of ratepayer money this year for energy efficiency.

Will these efficiency upgrades really help Oregon reach these greenhouse gas reduction goals by reducing energy consumption? Probably not.

Economists know that energy consumption is directly related to energy prices. As energy prices rise, consumption declines. Energy efficiency upgrades will not help Oregon reach its greenhouse gas reduction goals because increases in energy efficiency lower energy prices. As a result, ratepayers can use more energy but at the same cost as before. When efficiency is improved, there is room for new energy demand over the long run. This is known as the rebound effect.

Ratepayers with lower electricity bills due to efficiency upgrades also will enjoy a higher relative income, which likely will be spent on energy intensive goods, further fueling energy demand. This is why efficiency has increased significantly in recent decades while consumption is higher than ever. In order to curb energy consumption, one would have to lower efficiency or make energy more expensive by some other means, such as a tax.

Between 1960 and 2005, Oregon’s population nearly doubled from 1,772,000 to 3,543,442. From 2005, Oregon’s population is projected to increase another 28% to 4,536,418 by 2025. In tandem with increases in population come increases in energy consumption. Aggregate energy consumption in Oregon has increased 133% from 1960 to 2005.

This happened despite major gains in energy efficiency over the past 40 years. From 1963 to 2005, the energy intensity of the Oregon economy (the amount of energy consumed per unit of GDP) declined by 91%, a fantastic achievement. Yet, total energy consumption more than doubled. The more population, and the more efficient our society, the more energy we desire.

This is not to say that energy efficiency is a bad thing to pursue. Efficiency in general should be looked at in a positive light. It is always better to have a more productive device that uses fewer inputs. However, agencies and politicians need to realize that efficiency is not the silver bullet to reduce greenhouse gases. Creating a giant slush fund for energy efficiency subsidies is a misallocation of capital.

Is there a way to reduce Oregon’s aggregate energy consumption? There is no clear answer. The best strategy may be politically unpopular: allowing market mechanisms to continue increasing energy efficiency and making the state more productive, while accepting that our energy use is going to increase as well. Oregonians can conserve to the best of our ability and put efforts into developing innovative energy supply options that reduce environmental externalities, although there most likely will never be a power generation source that does not include some degree of negative consequences. The answer is not to reduce consumption but rather to use energy efficiency and consumption to literally “fuel” new technology solutions.

Todd Wynn is the climate change and energy policy analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

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Posted by at 06:00 | Posted in Measure 37 | 12 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    Great article. In my view efficiency to reduce greenhouse gasses is simply a mythic voyage the populace is set upon in order to keep them distracted and make certain people very rich. Efficiency is not a bad thing as you say, but the fact that its implementation has little to do with overall usage is a testament yet again to the fact that economic sense is incompatible with elected office. In the end I think we will simply see taxes continually added to our utility bills to pay for slush funds for the new technology that politicians just love to get their hands in.

    How long ago was it that we had Al Gore impose his stupid phone tax for wiring schools for the internet? We all paid the tax, which was rendered almost immediately obsolete by wireless technology, and a whole bunch of contractors got rich. I’m still waiting for my apology from Al. Government picking winners and losers through slush funds is almost always a prescription for disaster. Energy taxes for this purpose will be no exception.

  • Anonymous

    “From 1963 to 2005, the energy intensity of the Oregon economy (the amount of energy consumed per unit of GDP) declined by 91%, a fantastic achievement.”

    I’d hardly call driving almost every manufacturing and resource extraction business out of the state and the elimination of the high paying blue collar jobs associated with these industries a fantastic achievement.

    • David Appell

      Energy intensity has declined *everywhere*, *always*. It is a natural consequence of the fact that no one likes to spend more than they have to for a given commodity — thus they seek the cheapest ways, which gets lower as technology gets better. It is no accomplishment at all, except for not being a financial moron.

      In any case, it matters not, since what the planet responds to is *emissions* and not emissions intensity. You can decrease intensity all you want — if GHG emissions continue to increase (as they have, and are), then you planet is in peril.

      • bill

        Hey David, were still waiting for your many peer-reviewed papers that prove that CO2 emissions can cause dangerous global warming!

        It has been a couple months and you produce nothing!

        What are you hiding? You have access to al the major peer-reviewed journals, so why the delay?

        Perhaps it is because there are none?


  • Bob Clark

    Nuclear power, wind power, and maintaining existing hydro-electric generating capabilities look like viable options for growing electricity supplies without CO^2. Solar photovoltaics, bio-mass, and wave energy are still in the high-end novelty research phase, making them out of reach for a significant contribution for current and next generations. Natural gas is a bridge energy with lower CO^2 footprint than either coal or petroleum oil. Conservation is needed to keep the growth in electricity down to a range of 1 to 2 percent per year.

    As regards the Energy Trust of Oregon, it might make some sense to allow homeowners to self-direct their public purpose taxes to their own home conservation projects. Large industry is allowed to do this; and I think the public would take more ownership in conservation programs if it were allowed to substitute expenditures on measures such as energy efficient windows, insulation, and energy efficient light bulbs, etc. for public purpose taxes. I bet most folks don’t even know the public purpose tax appearing on their electricity and natural gas bills help fund Energy Trust of Oregon conservation and renewable projects.

  • dean

    I have read some dumb posts on Oregon Catalyst, but this one by Todd Wynn. really takes the cake. So if I buy a car that gets 50 miles to the gallon instead of my current 25, and gas prices magically go down (they won’t, but forget that for a moment,) this means I will drive twice as much? And if I replace all my light bulbs I will leave the lights on longer? If I insulate my house, what….I will open the windows in wintertime? I mean how far does one have to reach in an argument to be against doing the right thing? Does Todd really believe that the ONLY motivation for conservation is saving money? That’s it? No care about saving…oh I dunno…the planet? Geezz Todd.

  • dan


    Look it up there is a big difference between conservation and efficiency. Although they seem similar, they are different. Any educated person would know this.

    It is obvious you are not an economist. Todd makes a hell of a point. The thing is that when the price of a good goes down, you use more of it. Dean you are like many others that are on the global warming commission and part of the governors global warming alarmism army.

    When you save money with lower electricity bills, what do you do with the money? Do you just put it in the bank and never spend it?
    NO….you spend it on goods that need energy to be made.

    Energy efficiency increases consumption in the long run not short run. In the short run there is reduction in consumption. This is why all your people think there is success in efficiency.
    In the long run, you use more energy and the money saved is put into the economy stimulating more energy usage. Todd laid it out in a fairly simple way. You should have been able to understand it.

    also, reducing energy consumption is not going to save the planet.
    Besides does our planet even need saving?


  • Jim


    There are many peer reviewed papers regarding this issue. They all point to efficiency creating more energy demand.

    I love that you are on this site because you add a much needed opposing view. I am sure that these bloggers hate preaching to the choir all the time.

    However you should probably educate yourself on some of these issues before you argue.


    • bill

      Be careful here. Low prices will encourage a few more car trips as we trade convienence for cost, but are unlikely to have us turn up the thermostat beyond the comfort level.


      • dean

        Dan…I’ll speak only for myself plus some close friends with similar life values. I value time over money, and experience over material goods. What this means in practice is if I were to find myself with extra money on my hands because of spending less on energy, I would probably opt to work less and play more. Now some of that play might involve burning energy, but my particular brand of play is non-motorized. I’ll stiplulate that for some people, Todd’s “analysis” if we dare call it that, would be accurate. For many others with different value systems, not. Net effect? I don’t know, but I’d be more than happy to conduct the experiment by increasing our efficiency.

        Jim….point me to a few. Todd did not provide any. Like I said above, my argument on this topic is from personal experience, not competing studies or making a pretense about my empirical knowledge.

        For all….excessively LOW energy prices would be a nice problem to have, particularly if the energy source were not carbon based. The Energy efficiency projects Todd refers to all would cost capital that would be paid back by using less energy, so this whole debate is probably moot. Carbon based energy is not going to get cheaper via conservation. More expensive energy is going to make conservation more economical.

  • Anonymous


    What would you suppose the enviro approach to curbing our freedoms will be when we aquire cheap harmless energy for our vehicles?

    • dean

      I don’t understand the question. When and where are we going to get “cheap, harmless energy for our vehicles?”

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