What if we could replace all carbon fuels?

There is a deeply interesting discussion of energy policy going on at ask.metafilter. It hits on some of the best thinking in environmentalism right now, and takes that long-range speculative view that may not satisfy the average policy wonk but gives me the philosophical shiver that lets me know that some deep thinking is occurring.

DarkForest asks:

Lets say that everything went electric. Cars, power plants, factories, everything. How many nuclear plants (using current technology) would we need to produce?

The first answers are straight mathematical computations from the backs of napkins, and we get estimates ranging from 1000 to 4100 regular nuclear plants, to 200 thorium plants. Then somebody chimes in with the energy efficiency argument. Basically, increasing efficiency is cheaper than increasing capacity, and the return on investment for energy-efficient light-bulbs is three times as high as the most efficient solar installation. He advocates:

[A]doption of public policy that rewards end-use efficiency and penalizes inefficiency, so that we actually end up with the same or better end-use services [than increased carbon/nuclear production] while driving total energy demand down.

This is straight out of Amory Lovins’ Soft Energy Paths. I love this argument, because I love the clever turn back to economic efficiency justifying green policy, rather than pitting industry against the environment. But it doesn’t stop there.

Someone with the deeply satisfying screenname ‘Dasein‘ chimes in to argue against efficiency. “Money that is saved through efficiencies is reinvested in new energy-intensive applications,” he says. He goes on to explain:

You change your old appliances for new, energy-efficient ones. You change all your lightbulbs to compact fluorescents. As a result, you save $200 a year on energy, say. Do you just put that in a bank account? No, you buy a flight to Hawaii. Has your CO2 footprint gone down? If the power had been produced by a nuclear station, it might just have gone up.

A business invests in energy efficiency and saves a million dollars a year at its factory. What does it do? It drops prices on its products, allowing it to sell more for the same profit, and put the savings towards expanding capacity. Lower prices mean more people buy more of the product. Gains in efficiency are offset by increases in absolute production enabled by the efficiency.

I have to be honest: I’ve never thought of this before. It’s an extension of the basic Heideggerian argument about efficiency, which is that when we get into the mode of treating things like ‘standing reserve’ we’re completely constrained by this limitless attempt to store and harness the world, rather than letting it be. I think that might be right… but this is the first time I’ve ever seen it translated back into economics! The same thing seems to hold for gasoline usage, which is actually responsive to prices and thus cannot be curtailed through hybridization alone. Economists call it the ‘rebound effect,’ and the initial Lovinsian (who goes by flabdablet) responded with this report: apparently, no more than 40% of energy saved through efficiency is reinvested, and with automobiles it’s less than that: 10-30%, probably.

Sadly, that report depends on single sector evaluations of energy usage. It doesn’t measure the increased usage of gasoline due to space cooling efficiencies, for instance. While some people might work less if their energy bill was smaller, markets in general find ways to absorb efficiencies into increased productivity. This is easiest to see in industrial increases in efficiency, but it’s really just an effect of the way currency circulation constantly invokes energy expenditure, usually through the increased production and transportation of goods.

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