Monday, February 04, 2008

The Tata Nano Strikes Back--Does Jevons' Paradox Apply to Productivity, Too?

Can improvements in energy efficiency “save” modern civilization as we face declines in world oil production? While the efficiency revolution may let us drive on half the gas, the productivity revolution may make it affordable to twice as many--or more...

One argument against the efficacy of improving energy efficiency is called Jevons’ Paradox. This suggests that, when we improve our energy efficiency, we also reduce our demand for energy from that same use. That decreased demand in relation to supply makes energy cheaper, which in turn makes us use more of it. It has been suggested that this “rebound effect” only accounts for 5-20% of efficiency gains, but I have written previously about the potential for a “shadow” rebound effect that potentially accounts for nearly the entire efficiency gain.


The Tata Nano: While the efficiency revolution may let us drive on half the gas, the productivity revolution may make it affordable to twice as many--or more.

Often, I find it difficult to apply the very theoretical Jevons’ Paradox to pragmatic thinking about our energy future. The recent launch of the Tata Nano, however, stands as an example of Jevons’ Paradox in action. Possibly of much greater importance, however, are two related issues: the feedback effect between increased economic productivity and increasing energy consumption, and the aspirations of an emerging global middle class.

On January 10th, Tata Motors introduced its new, $2500 “Nano.” The launch was well covered on The Oil Drum and many other sites: roughly 50 miles per gallon, four doors, and one windshield wiper. And the potential for the Nano to bring millions of new drivers to a world already trying to conserve energy and reduce carbon emissions was covered as well. And if you dig deep enough, there was even one blogger who raised the nexus between Jevons’ Paradox and the Nano. What I hope to do is to raise that issue here, and to expand the analysis to cover what I consider to be the even more pressing nexus between the Nano, productivity improvement, and world oil consumption.

But I’ve heard that today’s economy is far more productive per barrel of oil consumed than our economy was in the past—won’t a continuation of this trend decrease demand for energy?

The Tata Nano isn’t the world’s most fuel efficient car, and therefore it doesn’t suddenly brings the automobile within reach of potentially billions of new drivers purely because of fuel efficiency. Rather, the Nano is revolutionary because it is representative of another trend in the modern economy—our ability to produce more for the same amount of energy consumed, and it’s broader corollary, our ability to produce most everything more efficiently and cheaply. If you track economic statistics with much interest, you have probably noticed that the statistics covering “productivity” show a virtually permanent increase over the past few decades. The Nano is a prime example of exactly that trend—in real dollars (and accounting for subsidies), it is probably the least expensive four-door car every built by a considerable margin. Some of that comes from economy of scale, some from the ability to leverage processes and materials developed elsewhere, and some is simply the result of designing with precisely that goal in mind. But the result is the same: a car for less money means a car that more people can afford to buy. To the extent that we are dealing with energy-consuming products, greater efficiency of production seems effect energy consumption via a process similar to that described by Jeavons for energy efficiency. The more people who can afford to consume oil in their own car, the more that will. The larger issue is that increasing productivity—of exactly the type that led to the Nano—is a critical requirement for the growth that drives our economy. Economic growth id driven by three things: increasing population, increasing energy availability, and increasing productivity. It has long been assumed, here and elsewhere, that a focus on productivity is the only realistic way to maintain economic growth if we are to control population and deal with plateauing or declining energy supplies. Does the Nano throw a wrench in that analysis? Even if this unanticipated consequence of increasing productivity only serves to negate our gains in energy efficiency, this is enough to cast serious doubt in my mind over our ability to maintain economic growth going forward.

The Tata Nano is also emblematic of another trend—the rapid emergence of a massive, global middle-class. This middle class may not have the same standard of living or net worth of the “middle class” in the West, but it is significant none-the-less. Today, tens or even hundreds of millions of Chinese, Indians, South East Asians, and Latin Americans can comfortably and confidently provide for the basic necessities for themselves and their families with money left over. They’re spending—and (yes, America) saving—this surplus toward aspirational goals, one of which is to own a car. Car culture in China is thriving, and with the launch of the Nano it seems that industrialists are betting on it thriving in India as well. Can the world, its oil supply and environment, accommodate another 100 million cars? What about another two billion cars? The danger of an economy that seems adept at squeezing ever more productivity out of each hour of labor and barrel of oil is that this same trend that could help the West soften the impact of Peak Oil seems poised to exacerbate the global energy supply crunch by making energy consuming cars affordable to an ever greater portion of the world’s population. This development seems to carry with it the significant moral hazard (already a hot debate topic within the world of carbon emissions) in the possible “solution” of denying these efficiency gains, or their products, to the world’s poor. Where is the cut-off? Do we cap the “middle class” at one billion? Two billion? The possibility and morality of such a move are highly suspect. We may be stuck between the rock of 2+ billion new middle class consumers over the next few decades and the possibly much harder class and geopolitical situation of those 2+ billion aspirants realizing they will never become “middle class” because of the decisions and prior consumption of the 1 billion in the “West.”

What next, will these people want air conditioning, too?

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12 comments:

Toes said...

Further consider the places to put the new cars. Roads, Highways, and parking lots are typically made from oil based asphalt or cement based concrete. The production of cement is a high energy input operation. I have a hard time imagining any scenario where availability of low priced autos will not drive increased use of petro based energy to build the vehicles, fuel them and make roads for them to traverse. Even if they were rubber band powered, I think Nanos would drive huge increases in consumption of energy.

Jeff Vail said...

I was curious about where the Romans got their cement--which is normally a very high-embodied-energy component of concrete--and it turns out they mined natural deposits around Mt. Vesuvius and other volcanoes. This raises another question about the energy required for concrete and asphalt roadways: can we expect to maintain this infrastructure (or extend it massively in China and India) if it takes so much energy to produce? Asphalt is obviously correlated to oil prices, but I think many people don't realize how much energy goes into the production of modern cement. I have no idea how extensive the natural deposits are that the Romans mined--the switch to modern fly-ash and blast-furnace derived cement can be explained by its faster set times--but I doubt we could maintain our roadways and other infrastructure (dams come to mind) with the natural reserves...

Rice Farmer said...

Gentlemen, this is an excellent point, and one that I too have tried to make repeatedly on my own blog and elsewhere. In the search for alternative ways to keep cars on the road, people are considering only the energy needed to propel motor vehicles, and just assuming that the roads and bridges and other traffic infrastructure will be there. In my view, the inability to maintain the infrastructure for motor vehicle traffic will do just as much to kill the car culture as anything.

Jeff Vail said...

The infrastructure question makes me think about the efficiency question again. If we accept, for purposes of this argument, that it is possible to triple the average fuel efficiency of existing gas & diesel powered vehicles, is it also possible to triple the efficiency with which we make and maintain roadways?

The conventional wisdom has been that greater investment in a roadway (e.g. thicker concrete bed, deeper prepared foundation, etc.) makes it last longer. I wonder if any analysis has been done on roadway construction & maintenance from an energy efficiency/per car traveled/per year perspective? Is it possible (likely?) to decrease the embodied energy in our roadways when the two primary components--concrete and asphalt--are so directly linked to high energy inputs?

How much better (comparatively) is the situation for railways? I know many advocates (like Matt Simmons) tell us that rail is so much more efficient a means a transport than cars/trucks from the perspective of fuel consumed by the transporting vehicle, but what it the energy requirement for construction and maintenance? I don't think we can make an informed comparison (whether this makes it better or worse) between truck and rail until we include this component.

Marcin said...

Jevon's paradox is resolved simply: bypass the entire argument. Produce material wealth sustainably - within the limits of natural life support systems and basic physics. For example, go solar - the sun sends at least 10,000 times more energy to the Earth than we use at present. Or, use abundant resources that don't run out - see our development of the world's first open source, high performance Compressed Earth Block (CEB) press:

http://openfarmtech.org/weblog/?p=91

and other products in development:

http://openfarmtech.org/index.php?title=Overview

Rice Farmer said...

I hadn't considered railways, but you are right -- the infrastructure energy requirement needs to be considered. Airports, too. Here in Japan, there is a push to build more roads, expand airports, etc., all under the obvious assumption that the required energy will be available.

Although I lack the expertise to do such calculations myself, I did look into the energy requirements for road building. The analyses I saw focused on CO2 emissions, but I did glean the useful fact that most of the energy for road construction is needed to prepare the materials and transport them to construction sites.

nulinegvgv said...

And it's not just the roads themselves. Consider that land use patterns change completely when many or most people own a car. More of everything is used up as the footprint of human habitation changes with car access.

Jeff Vail said...

nulinegevgv-

I think this change in behavior driven by the use of cars is really critical--this is what makes demand for oil more inelastic. The infrastructure for cars, and the built environment that springs up around this framework, represents a massive sunk-cost for car-based transportation. The theoretical value of American suburbia is a massive obstacle to overcome--the price point where Americans would abandon the "wealth" they see stored in suburbia is probably very high... I think there are effective ways to adapt suburbia to a low-energy future, but they're rather extreme from the perspective of current suburbanites, and the window to take effective action seems to be rapidly closing.

Rice Farmer said...

Here's an article on the Nano. Talk about Jevons paradox!
http://blog.wired.com/cars/2008/02/2500-cars-in-in.html

Now I would like to expand a bit on the comments by Nulinegevgv and Jeff. The point about suburbia is quite correct, I think. But there is still more. If you drive along any major highway in the US, you will see an astounding number of businesses that depend on lots of people to come their way by car. Hotels/motels, restaurants, souvenir shops, theme parks, amusement parks, tourist traps, and the like. So, when you consider the suburbs, the long-distance transportation system highly dependent on trucks, the high degree of economic centralization, and the huge number of businesses which need people to drive long distances in their cars (the "summer driving season" is a make-or-break season for them), we can see that in many ways the economy is structurally dependent on high fuel consumption for transportation.

Japan has developed in the same way so that if private vehicle use becomes too expensive, it could deal a devastating blow to the economy.

It seems to me that most people have not noticed the great extent to which this structural dependence has evolved. They say we can save fuel by eliminating a lot of "unnecessary" driving, but it's not so simple.

nulinegvgv said...

Of course Rice Farmer is correct in pointing out that it's not just about the roads or the rest of the land use infrastructure put in place based on majority access to the automobile, but also the behaviors driven by car culture. The fact that we've invested so much in our decentralize transportation system will mean plenty of economic losers as the energy to power those cars decreases in availability. It's not really oil we're addicted to so much as the oil-powered automobile.

jeff I agree that it's still too early to make radical suggestions to suburbanites. And that's because they're still heavily invested in the system as is. We'll probably have to wait until it's too late to avert some of the more painful aspects of energy descent before such suggestions find open ears. So if we don't have time for a slow, cultural reformation and we don't think a revolution is likely, what do you call some sort of middle course of action?

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Tata Nano Review said...

According to me it follows this paradox.Now the Tata’s have brought significant improvements in the New Tata Nano 2012 making it more value for money without any price changes.I think the features which are added to it makes it a good choice to buy.