Different shades of green

OIL tycoons, mining giants and airlines make for such perfect villains in the global-warming debate that it is easy to forget the environmental impact of a humble household. But a report published this week by the OECD, a rich-country think tank, notes that households use up to 30% of global energy production, and emit 20% of its CO₂ emissions. The paper, which contains results from a major international survey, looks at ways governments can steer households towards a greener future.

The conclusion of the report is that more demand-side schemes to encourage people to make environmentally-friendly decisions for themselves are needed. This may prove hard. Politicians face an uphill battle, as nearly half of the respondents declared themselves unwilling to pay a penny more for renewably-sourced electricity, for instance. But the authors believe that soft policy measures like eco-labelling and public-information campaigns can make a real difference in nudging people to reduce their energy consumption.

In contrast, the Green Deal for household energy savings announced by the British government last year is ruthlessly pragmatic. The scheme allows licensed companies to offer customers credit at no initial cost toward work to make their homes or workplaces more energy-efficient. The loan is paid back in instalments added to the customer's (reduced) energy bill. The reasoning is simple: since households will not fork out cash for double-glazing or loft insulation to save the environment, they need to be inveigled into efficiency savings with a promise of free cash.

Britain's plan has its critics. Many point to the so-called Jevons Paradox, the observation that efficiency gains lead to an actual increase in consumption. The insight comes from William Stanley Jevons, a 19th-century British economist. He was concerned about Britain’s dwindling coal reserves, and noted that technology which allowed getting the same energy from burning less coal only exacerbated the problem, since they led to more furnaces being constructed, and to increased overall coal use.

Following oil crises and burgeoning environmental awareness in the 1970s two economists, Daniel Khazzoom and Leonard Brookes, updated Jevons’s work, casting doubt on the environmental benefits of more energy-efficient cars, appliances and homes. If products are cheaper, they argued, people will buy more bigger devices and leave them running for longer. So while Britain's Green Deal aims to reduce household CO₂ emissions with the carrot of lower heating costs, homeowners may respond by cranking up the thermostat. Hence, the OECD's focus on cajoling individuals to reduce their own energy use voluntarily.

Though most economists accept that some increase in demand will occur when a commodity’s price falls, whether this outweighs the initial drop in consumption remains fiercely debated in academic circles. But there is something to it, if Babbage’s own experience is anything to go by. Before the invention of the word processor, every rewrite of this article would have cost him considerably more time and effort. So, he would only have done relatively few of them. Now that redrafting is easy, he has been making meticulous tweaks through the night. And keeping the lights on.