How Conservation and Efficiency Can Sometimes Increase Consumption
Conservation and efficiency are always good, right? Unfortunately, not always.
Many of us, myself included, consider ourselves conservationists. We don’t buy or take things that we don’t need (for example, lots of extra paper napkins at the restaurant). We consider the energy efficiency of our vehicles, appliances, and other things we use in our homes. And, in principle, we are in favor of measures that encourage everyone to conserve more like recycling. But, things don’t always turn out as we expect, and we must be diligent that our conservation measures don’t end up resulting in more consumption than would otherwise have occured.
There are several causes and conditions for this type of occurence, and most involve market economics. To illustrate my point with an example, let’s consider a few potential conservation regulations that could be enacted by a municipal government.
Cityville, USA has experienced recent population growth and the construction of thousands of new homes and expects to see the trend continue. Meanwhile, the municipal water supply has not been increasing due to a decade of below-average rainfall. The city lacks the money to construct a new resevoir as tax revenues have been stagnant due to several industries leaving town. The city implements two new regulations: (1.) mandate reduced flow flush toilets in all new construction and renovations; and (2.) mandate all sprinkler systems use a new efficient valve and sprayer.
Regulation (1.) works as intended. People flush the same number of times per day before and after the regulation so demand is constant. Water use is reduced. People save money spent on water and put it to other uses. Regulation (2.) however, does not work as intended. Water use is increased. Why? The old system was inefficient, the new hardware expensive, and therefore it was too expensive for most homes and commercial buildings to operate. Mandating the new equipment caused an increase in supply of those components, reducing their price somewhat. The water used per operation of the sprinkler was greatly reduced, so the system became much more affordable for a greater number of people. More sprinkler systems were installed, although water used per use was reduced, the overall community demand for water was increased.
So, we have one rule to follow: be careful not to inadvertently increase demand by mandating efficiency improvements. In cases where demand is inelastic, efficiency mandates can work. In cases where demand is restricted mainly by cost, efficiency improvements can increase demand as more people join the market, if other controls are not in place. Other controls could have included increases in the price of water, or limits on new sprinkler systems. Since the goal was to fit population growth into a constrained water supply, the additional control regulations in addition to the efficiency regulation was probably in order.
Another aspect to consider is demand transfer. Restrictions on one resource could transfer demand to a related resource or to a different one that is even more limited or damaging to the community. As an example, let’s consider fish. Let’s say Yummyfish catches have declined precipitously in recent years, and the government decides to implement a temporary but total ban. People still like fish, so they go to their second choice and demand more Tastyfish. Young Tastyfish, while more plentiful, however, are a main meal for the Yummyfish. As the Tastyfish population declines somewhat under the increased fishing pressure, the Yummyfish population collapses and is not available to fish for decades.
In more general terms, people could have transferred their demand, from saved money not spent on Yummyfish or whatever resource in question, to any other item. If we were considering something more general, like energy, as every product requires some energy, demand could easily have been transferred to some industry or item that was not part of the efficiency regulation. In the end, without considering the ease of demand transfer, we could make a situation worse and increase consumption by enacting what we thought was a conservation measure.