NC State’s Dr. Mike Walden – Tax Energy Conundrum
One of the ways we’ve tried to deal with energy scarcity and high prices is through improved efficiency of energy use. But not everyone thinks this will work. N.C. State University economist Mike Walden explains why.
“Well, here’s the issue … . A very basic principle in economics is what we call the law of demand. And what that says is that the higher the price of something, the less that we’re going to use. We’re going to try to become frugal. The lower the price of something, the more we’re going to use.
“A recent … book [The Conundrum] focusing on energy said that this actually could work to the disadvantage of energy consumption, because there has been a big push … to improve energy efficiency in the country. And we have succeeded, if you look at appliances or you look at vehicles or even home heating and cooling apparatuses, you see that the efficiency has gone way up. I know when we replaced our furnace, the last couple of years, we saw the efficiency go from something like 70 percent up to 90 percent. And that’s all good.
“But what this author pointed out is, in terms of energy use, if our appliances and our vehicles are more energy efficient — that is, we’re getting more per dollar spent, more energy per dollar spent — that’s effectively lowering the cost, and we’re going to want to use more of that energy.
“And that sort of works against the idea of energy efficiency, if we’re using less energy. So this is not to say we … should stop trying to improve energy efficiency, it simply says there is a feedback loop here — that is, as we become more energy efficient and that lowers the cost, we’ll likely bump up our energy use somewhat.”