Thanks Cameron - a succinct and clear discussion. This is a very important dynamic for us to understand, especially when the efficiency dividend that is needed to bring CO2 emissions down to save levels is probably closer to Factor 10 then Factor 4.

If we take the policy measure of a "cap", which you made the case for based on economic theory, and we translate it into the language and concepts of everyday values and decisions, then we find ourselves in the territory of restraint - a place where people choose to consume less, even though they have the means to consume more. While I'm not an economist, my superficial understanding of the economists' paradigm is that this is considered an absurdity - Homo economicus will always seek to maximise the utility they extract from the world, which is equated with consumption of goods and services valued in the money economy.

I'm interested in what a public policy conversation would look like in which restraint (personal, corporate, collective) was considered as a plausible policy goal. If efficiency won't deliver sustainability then restraint (and I hear the entire global machinery of perpetual growth tensing at the mere mention of the word) is the heresy that dares speak its name

Yes, a nice discussion of an abstract world inhabited by homo economicus, who eats a mythical substance called utility. There is a serious question here, but these little theoretical exercises don't get to its essence (and it doesn't take a genius, named Tao or otherwise, to come up with cute examples like these).

On the one hand as, for example, houses have become marginally more energy efficient, they have got bigger, but that has more to do with a mismanaged banking system and manipulative marketing than with inevitable economic laws. But yes, there is a problem.

On the other hand, 25% of adult Australians chose voluntarily to "downsize" over the course of a decade, according to the Australia Institute's survey - meaning they chose a reduction in income to improve their quality of life. Unlike homo ec., real people *are* capable of stepping off the consumerist treadmill.

But consider carpet manufacturer Interface Corporation, which reduced its raw material intake by a factor of 30 by converting to manufacturing carpet squares and converting to a recyclable artificial fabric. It also reduced its energy use, eliminated toxic dyes and increased its profit. Homo economicus didn't get a look in, because CEO Ray Anderson made it happen without consulting economic theorists.

There is the potential for a second industrial revolution, based on 100% recycling of materials and far greater efficiency of energy use. It's there to be done, and many first steps have been taken. Did you know Germany requires old cars to be accepted back by manufacturers, who have redesigned them to facilitate recycling and remanufacturing?

This kind of simple nay-saying is not helpful.

Thanks for bringing in the Downshifting example Geoff - its a very important piece of the case disputing the supremacy of Homo ec. But we need to be careful not to miss the killer insight at the centre of Cameron's argument - that in a broader socio-politico-economic system engineered for growth, resources freed up by efficiency will drive consumption somewhere else in the system. So we need outstanding individuals like the Interface carpet man to show what's possible technologically, but we also need specific policy measures to drive an overall and on-going contraction in resource use. The German auto-industry example is a good one. Two possibilities: (1) the regulation made it more expensive to make cars, in which case the prices went up. This is a good outcome as it means the price more accurately represents the full life-cycle cost of the product. (2) the regulation opened manufacturers' eyes to actual savings in the cost of production through greater efficiency in the use of resources - in which case either lower prices for consumers or higher profits for manufacturers feed into increased spending somewhere else in the economy.

I don't think this is nay-saying. I think it is important unpacking of the dynamics of the monster we have created. To slay the beast we must know it!

A thought provoking input.

The Jevons paradox can be seen in energy use statistics (US Energy Information Agency World Energy Outlook 2008), where the average energy intensity (AEI) for the US (and for other OECD countries) has declined from about 16MJ/$ to 10MJ/$ from 1980 to 2004- about 1%/year. However, the total energy consumption per capita has remained constant and the total energy consumption has increased due to increased population.

As I have expressed a number of times on OLO, there is a nexus between energy embodiment and money- whether it is an exact equivalence is not important. The important thing is that you can't spend money on goods or services without ultimately consuming energy.

Although Geof Davies has a point that we can- and some people do- opt for voluntary simplicity, most of the evidence points to most people spending their (energy/money) efficiency dividends in greater consumption of goods and services.

The main focus has been on energy cap and trade, but as Cameron points out, there are ways of defecting that negates individual or country efforts. Another way would be to cap the money supply. Given that productivity averages about 2%/year (about 1% from energy/technology efficiency and 1% from "learning"), then by capping the increase in (real) money to 1%/year, the energy dividend could be saved. This would also mean capping credit as "defection" can occur (and has) through greater credit card use and borrowing beyond the capacity to repay (read sub-prime fiasco).

Sounds draconion? Not really. A 1%/year increase in productivity means a "stanadard of living" doubling in 70 years. Not as good as the 2% we have enjoyed for more than 100 years, but a small price to pay for saving the planet.

Take home message: The "market" of pure selfishness cannot optimise, it can only maximise. Society needs a plan (apart from "grow"), and regulations to help us get there.
If we rely only on animal spirits then we will mimic nature: exponential growth then crash...taking a large part of the ecosystem with us.

I don't agree that the article was clear or succinct but I do agree with the basic message.. improved efficiency will not lead to reduced demand on resources, but the reverse.
However, that should please green activists as their policies are aimed at reducing efficiency - wind energy is the prime example. Then there is the mainstream preference for green-star buildings. the green star system may do something to increase energy efficiency but whether, on a straight cost-benefit trade off, it is worth the trouble is doubtful indeed.