Jevons Paradox And The Economic Implications For Europe

Abstract

Energy consumption has increased considerably in the past two hundred years despite more efficient technology advancements. This positive correlation between increased energy consumption and increased efficiency is known as Jevons Paradox. Increased energy consumption should be of concern because all the inputs to economic production come from the environment and the consumption of resources from the ecosystem will cause an economic slowdown. Additionally, the consumption of natural resources to provide energy is an irreversible process, worsening the human condition instead of improving human welfare. Therefore, sustainable development policies need to be considered to end the continued excess consumption, beyond sustainable levels, of natural resources and the potential resulting conflicts. To design environmentally sustainable policies, the effect of economic activity, of resource utilization, and increased efficiency must be understood. In this paper, we attempt to illustrate how energy consumption alters the natural state of the economy and the environment. Further, using energy data from the Energy Information Administration we develop models that provide empirical support that Jevons Paradox may exist on a macro level for the countries of Europe. Specifically, eighteen European countries are examined. Finally, the resulting policy implications and the applications for an ecological economic approach are explored.