Open Eye: Save energy, then use more of it

Have you lagged your loft this winter? Fitted low-energy light bulbs? No doubt you hope to save money, but as a responsible, socially-aware individual you're probably also motivated by the thought that saving energy helps to save the environment. But what if it doesn't?

OU visiting research fellow Horace Herring has been looking at aspects of energy efficiency for the past six years. Now he is stirring up controversy with his conclusion that policies to promote savings actually increase national energy consumption.

It sounds paradoxical, but economists have been saying it for years, says Horace, who admits having had to re-think his own ideas as a result of his research. This is how it works:

"It is a standard tenet of economics that if you improve the efficiency of a factor of production, more use is made of it. In other words, if people are encouraged to buy insulation, low-energy bulbs and so on, what do they do with the money they save? They spend it on new goods, which stimulates manufacture which uses more energy. Or they put it in a bank, which invests it in activities which use energy.

"You can see lots of parallels elsewhere. Take aircraft - we were told that introducing bigger aircraft would mean fewer landings and therefore less noise. In fact what happened was that flying became cheaper, so more people flew, so we ended up with more aircraft. The same argument goes for increasing the size of HGVs.

"Somehow, we assume that energy use is different. But over the last 150 years most countries have increased their energy efficiency - and their energy consumption has risen."

A dedicated environmentalist, Horace at first found the economic view hard to swallow. "I had quite a few battles with economists. I could not accept this line of reasoning because it seemed against commonsense. But I've had to reconsider."

If you've read this far and are tempted to start ripping up the loft lagging, don't. Energy efficiency is still a desirable goal, says Horace, and most of the criticism his report has attracted is based on the mistaken assumption that he is arguing it's a waste of time. He's not.

"Saving energy is a good thing because it saves money, it makes us more affluent and comfortable, it makes for a more efficient economy and reduces pollution. Getting more from less is something we all want. But it won't save the world."

There is an answer to this apparently insoluble conundrum. If government were to tax energy use, it would encourage energy efficiency without increasing consumption. The tax revenue could be used to support environmentally- friendly projects such as `green' electricity, forest-planting to soak up excess carbon dioxide in the atmosphere, and so on. Effectively, the money saved by energy efficiency would be `recycled' to help the environment. This fits well with the policy of the current government, which has reaffirmed its target of producing ten percent of Britain's energy requirements from renewable sources by 2010 - five times more than at present.

Since New Scientist ran an article on Horace's report, their letters page has carried weekly correspondence about it. To Horace's surprise `none has directly challenged the central thesis'. In fact, he has support from a number of leading environmental economists. But will it be taken on board by national policy-makers? Horace is pessimistic.

"Taxes are very unpopular, and although this government is sympathetic to environmental issues, I don't think it will want to do something that will make it less popular."

Another argument against energy taxes is that some people won't be able to afford to keep warm, but Horace argues that cheap energy isn't the solution to poverty. "One of the first national priorities should be insulating the homes of poor people."

But if the tax option is fudged, and Horace's theory is right, government will find itself with a dilemma. Along with other European countries, the UK is committed to reducing emissions of `greenhouse' gas CO2 by 20 percent. It is counting on energy efficiency to make a big contribution to this, but the signs are not encouraging. Ninety percent of CO2 reduction achieved since 1990 has been due to the spectacular decline in the British coal industry - not a process the current government can (or would wish to) rely on in future. If energy efficiency doesn't deliver, the only alternative left is regulation, which is unfashionable in the current political climate, and has a poor track record.

A European programme launched in the early `90s to regulate domestic appliances, starting with refrigerators, has already fallen by the wayside. "So many grand international plans have been quietly dropped," says Horace, who thinks the chances of the UK meeting its CO2 reduction targets are very low indeed.

"We'll probably just muddle through as usual."

Does Energy Efficiency Save Energy?: the economists debate, by Horace Herring. Ring 01908 653335 or e-mail h.herring@open.ac.uk.