Stanley Jevons reckons cheap renewables won't make oil and coal redundant. I believe him

Economic lessons from the Stone Age and a 19th century paradox that the modern environmental movement needs to accept

Thank you to all my subscribers.

I have now made paid subscriptions available and appreciate any financial support you are willing to provide. For those who already pledged, thank you. Your paid subscription has begun.

For now, a paid subscription gets you only good vibes. But in 2024, better things are coming. My book, The Great Housing Hijack, will be released, and with your help, Fresh Economic Thinking will evolve into Australia's newest think tank.

Stay tuned!

As always, please like, share and subscribe.

Thank you
Cameron

---

English economist William Stanley Jevons was born in 1835. At the age of 30, he published the famous book The Coal Question: An inquiry concerning the progress of the nation and the probable exhaustion of our coal mines.

He sought to explain a counter-intuitive phenomenon – as coal-fired steam engines got more efficient at converting coal to power, the use of coal increased, not decreased.

Nor can the economical use of coal reduce its consumption. On the contrary, by rendering its employment more profitable, the present demand for coal is increased and the advantage is more strongly thrown upon the side of those who will in the future have the cheapest supplies.

In fact, he took it further.

He correctly predicted that the increasing use of petroleum, a new fuel at the time, would make coal even more attractive and expand our capacity to make use of coal.

To extend the use of petroleum, then, is only a new way of pushing the consumption of coal. It is more likely an aggrevation of the drain than a remedy.

Here, he was referring to the drain, or depletion, of the finite known stocks of coal. Using more petroleum would increase coal consumption, not offset it, in his view.

How can becoming more efficient at turning coal into power, as well as more efficient at using other fuels, lead to more coal use, not less?

This idea is now known as Jevons Paradox.¹

Jevons and his famous book

Jevons contradicts environmentalism

Another idea that has deeply affected my thinking on resources and technology is that “the stone age didn’t end because we ran out of stones.”

This phrase is widely credited to Don Huberts, the then head of Shell Hydrogen who was quoted in the July 1999 edition of The Economist. Others suggest that Ahmed Zaki Yamani, a former Minister of Oil for Saudi Arabia, used this phrase back in the 1970s.

These men expressed a view that new energy technologies would leave oil behind by reducing demand for oil, its price, and ultimately, its extraction. If you want to make money from oil in the ground, it needs to happen before new technology makes it redundant.

This is a common view today in policy circles. We assume that, for example, as renewables like wind and solar get cheaper they will make oil and coal redundant.

But it contradicts Jevons and his correct predictions that more efficient use of oil would not make coal redundant, but lead to more coal use.

Suppose Jevons is right that using materials more efficiently increases the use of that material and others. In that case, we should be seeing more material and resource use now than ever in human history.

And we do. The Stone Age didn’t end. We are living it right now.

The difference now is that we aren’t using stones as tools. We left behind this technological use of stones. But we didn’t leave behind the material use of stones. As we invented better tools and technologies, it reduced the cost of using stones as a material input for any use.

So today, our roads, buildings, bridges, and almost all development works are made of stones. We use stones in construction, especially concrete aggregate, and move stones during earthworks and tunnelling.

According to Vaclav Smil’s Making the Modern World: Materials and Dematerialization, humans used 40 billion tonnes of rock, stone and sand in construction materials in 2010 alone, or about 5.7 tonnes for every human alive on Earth that year.

I doubt any time in human history saw people move nearly six tonnes of rock, stone and sand, every year of their lives. It would have been inconceivable to Stone Age humans.

Contradictory economic logic

We use more stone today because we use every material resource more efficiently. Just like using petroleum makes using coal cheaper, so too does our efficient use of many fuels and materials enable us to dig more holes, mine more minerals, build bigger cities, and generally move materials around the planet.

The economic logic behind this is easier to see if we take an extreme example.

If a new technology was invented tomorrow that provided a radical 100x increase in the amount of energy would could get from each barrel of oil, what would happen to our use of both oil and other material resources on Earth?

We would consume much more oil and more of every other resource.

We could more cheaply mine for lower-quality ores, drill deeper into oil and gas reserves and take our ships further and faster across the oceans. That cheap energy would lead to even more use of stones, gravel, and sand, as we could more cheaply and rapidly extract more stones from our quarries and more quickly construct buildings and infrastructure with that stone.

Today, however, the economic logic of Jevons is hidden.

Instead, two contradictory ideas sit behind different environmental policies.

1. Make energy cheaper to reduce other resource use

2. Make energy more expensive to reduce other resource use

The first applies to making energy cheaper with renewables to reduce the use of other resources like oil and coal. The second applies more when it comes to non-specific “reduce our environmental footprint” concepts, which I think means mostly reducing land use changes, such as stopping mining or agriculture from encroaching on high-amenity environmental areas like rainforests.

But Jevons shows that only the second idea makes sense. Technology won’t reduce our use of materials.

We need to collectively decide if we want some resources left in the ground, and create rules that ensure that we get that outcome. In other places, we need to work out how to manage resource extraction and land rehabilitation to get value from those resources and ensure that high-quality environmental amenity is retained or replaced. If you’ve read Elinor Ostrom’s approach to resource management, you will get what I mean.

If we want to change environmental outcomes, we need to understand the economic forces at play and decide what outcomes are better than what we have. Then comes the tough job of deciding what trade-offs to make and what rules and institutions will work to get the trade-offs we want.

1. My master’s thesis was on this topic and you can read it here.