It’s Earth Day today. This is a day to raise awareness about the environment and issues such as climate change and resource depletion. But I’d like to raise something which is often overlooked though, to do with the economics of climate change. But can we really cut our energy usage by switching to more efficient appliances?

Let’s take energy-saving light bulbs as an example. An standard 100W incandescent light bulb is exceptionally inefficient – it produces about 95% heat, only 5% of that energy is turned into visible and useful light. However, new energy-saving fluorescent light sources can produce the same amount of light for just 20W.

OK, so there are considerations such as the amount of energy which used in manufacturing new fluorescent light bulbs for us to use or the costs of installing additional insulation to reduce heat loss because less heat is now produced by light bulbs. Although they are very valid points, they’re not the issues I wish to explore.

On the face of it, if we all switched from 100W incandescents to 20W fluorescents, there would be a 80% drop in the energy consumption! Hey, presto! But that isn’t the whole story. Because economics tells us that when the price of something falls, consumption increases. In other words, because our lighting systems now consume less energy and cost less to run, people will demand more lighting systems.

Take a look at this graph from the presentation “Energy Services and Energy History: Lighting and Transport in the UK” (slide 11).

The cost of lighting (and efficiency) has been falling steadily since 1300, yet it is obvious that we are using much more lighting now as costs have been falling. Since 1900, the efficiency of lighting improved 50 times. Meanwhile, the amount of lighting used has increased by 155 times. So despite all the huge efficiency improvements over the last 100 years, we’re still using 3x as much as energy as we were before.

What I hope this has demonstrated is that improving energy efficiency won’t necessarily decrease energy usage. But would switching to more energy-efficient bulbs cut energy usage in our developed world today? Perhaps. For me, the cost of leaving the light bulb on is so small that I barely even think about it. So a light bulb which costs less to leave on probably won’t cause me to leave the light on for any longer then I currently do. But in some countries, if the price of leaving the light bulb on is now a fifth, I could envisage households which might decide that rather than just having one light bulb in the lounge on, they could now install a light bulb in every room in the house. This increased usage of lighting would negate any of the benefits of improved energy efficiency.

It might all seem a bit pointless talking about light bulbs, but I chose it as an example because it’s easy to explain and there’s a lot of good data. But this same theory can apply to all kinds of other things.

Let’s say that a new generation of cars has twice the fuel efficiency. This means the cost of running the car is half what it was before. More people will therefore decide to use cars, and perhaps to use cars on those short journeys they wouldn’t have before. Also in the less economically developed countries, this could make running a car a viable proposition for many people.

My conclusion is that we can’t rely on improvements in efficiency to reduce our energy usage. It simply won’t work. In fact, it could even lead to increased energy usage and make things worse. That’s not to say we shouldn’t create efficient light bulbs and cars but they’re not going to save the environment. We need more proactive ways of dealing with our use of fossil fuels.