Mind the Gap: Energy Consumption to grow up to 50% over the next 25 years
Studies have shown that energy consumption across the globe is set to increase anywhere between 30-50% in the next quarter of a century. For many countries this will include soaring air pollution, oil consumption and greenhouse gas emissions – all of which, of course, lead to rising energy prices.
Whilst the roll-out of energy efficient technologies, products and methods offer real potential to help the problem be reduced and the associated environmental damages lessened, their take-up worldwide is yet to reach a level that could be considered acceptable for the future. This difference between the take-up and usage of such efficiencies and the potential damage current usage would still allow to be caused is known as the “energy efficiency gap” or the “energy paradox”.
The first major detailed study into this area has just published, coined by Professor Richard Newell at Duke University and Robert Stavins, the Director of the Harvard Environmental Economics Program, sponsored by the Alfred P Sloan Foundation. The investigations aimed to uncover the possible explanations for the paradox and as a result, to identify how to best implement and spread efficiency technologies. The study, called Assessing the Energy Efficiency Gap, draws in work with leading social scientists and US-based scholars, and has been co-authored by a pre-Doctoral Fellow of the Harvard Environmental Economics Program (HEEP), Todd Gerarden.
It has found stark contrast between private and social optimality of efficiency technologies, examining the assumption that some such technologies would not be adopted, despite the fact they would pay off financially, and the assumption that some such technologies would not be adopted despite their projected social payback.
Investigations began by dissecting cost-minimising energy efficiency decisions into their fundamental elements: whether or not they are economically efficient; whether energy operating costs are priced appropriately and understood; whether or not product choices are currently cost-minimising or whether they’ll be affected by later external factors; and finally whether other non-observed costs may inhibit the decision to adopt efficiency measures.
Once these four elements were studied, these are understood in terms of market failures, behavioural effects and modelling flaws. These include the explanations for failed adoption as informational issues, energy market failure, capital market failure, attitudes and business appetites, understated and misunderstood costs, ignored and misunderstood product attributes and the use of incorrect and misunderstood pricing.
Needless to say, Assessing the Energy Efficiency Gap finds all three explanations for method and measure adoption failure to be theoretically sound with some empirical evidence for every category.
The validity from each explanation can now be used to influence future policy and planning around the paradox and be used to justify and effectively bridge the gap that current measures (both adopted and un-adopted) leave behind. High priority should now be given to research that evaluates the effectiveness, cost-effectiveness and economic efficiency of such policies, to not only develop new ones but also to enhance, improve and develop those already in place or planned for the future.