Energy Efficiency And Its Hidden Dangers

A recent event sponsored by the British High Commission on climate change and low-carbon business drew out into the open a serious issue. As many are aware, should the temperature rise as much as 4 degrees Celsius (or about 7 degrees Fahrenheit) due to climate change, some serious problems for countries around the world will emerge.

One of the keys to keeping carbon emissions, and therefore climate change, in check is getting reductions in place. One of the easiest and most palatable ways to sell this to business is through energy efficiency measures.

Energy efficiency in business is considered low-hanging fruit, something that can be easily achieved in many cases, with both environmental and economic savings. They have one of the highest internal rates of returns (IRR) and companies can usually see the business case to do it. However, Frederic Crampe, Managing Director of ReEx Capital Asia stumbled onto difficulty with one of his case studies.

In discussing a client project in the Philippines, Crampe mentioned that some simple steps were taken to conserve energy in one of the properties of a shopping mall developer. The net operation savings were in the vicinity of US$1 million in the first year, and likely to be similar going forward.

Naturally, the business owners were pleased to see that much money being returned to their bottom line… and like most businesses, naturally already had ideas on how to spend it. In fact, they were considering developing a new shopping mall with the proceeds of their energy efficiency exercise.

It was a classic case of the so-called “rebound effect.” Basically, it works like this: investments in energy efficiency, while initially positive in reduction of energy usage, eventually result in overall usage of more energy. Why? Because cost savings get reinvested into other consumptive activities of some kind.

In the case of this mall developer, a reduction of consumption in resources will give funding to yet another outlet for consumption. When challenged on the logic of the situation, Crampe replied,

“I don’t see a problem with this. Development in many corners of the world still needs to happen, and people need jobs.”

Comments on from the audience came thick and furious. Eugene Tay, editor of the Green Business Times said,

“While this may be an energy efficient approach, it certainly is not energy effective in the end result.”

While its true that people need jobs and will always have a need for certain products and services, a shift needs to happen to ensure those products and services are produced in an environmentally sound manner. Supply of resources on a finite planet is limited. Continuing an unquestioned, endless cycle of consumption of resources perpetuates the problems we are facing in many areas, including climate change.

Dr. Geh Min of the Singapore Nature Society said,

“If energy efficiency leads to more consumption, rather than overall reduction in resource use, then we are on a self-defeating path.”

Jessica Cheam , reporter for the Straits Times agreed.

“Without assessing patterns of consumption, we’re definitely heading down the wrong track,” she said.

Ultimately, we need to question if these incentives for companies are really working. We need to scrutinize where the savings are going if energy efficiency is really going to help us solve climate change.

This example beckons the question — through many energy efficiency initiatives, are we deluding ourselves into more business as usual?

If at the end of the day we are only enabling the existing system to work more efficiently down the same misguided path, we’ve accomplished nothing but wasting valuable time.

Rajendra Pachauri, head of the IPCC brilliantly paraphrased the wisdom of Gandhi from decades ago in a recent interview.

“Who cares how fast we are moving if we are going the wrong direction?”

If business is to be a key player in turning around emissions, and take a genuine stand on climate change, a fundamental shift in mentality and operation is necessary. Anything less, and it becomes just a bit of history repeating.

Article appearing courtesy of Celsias

Have any Question or Comment?

7 comments on “Energy Efficiency And Its Hidden Dangers

Dan Bariault

I find several of the comments illogical. Tying energy savings and what investors or business owners do with the money is quite unrelated. Tying the two together would lead to the argument that any economic development (which arguably raises the standard of living) leads to increased consumption and therefore increased energy use. Efficiency has to do with extracting more from the energy we produce, regardless of the source. It is critically important in as much as India, China, Russia, Brazil, and the rest of the World will continue to develop and consume greater and greater amounts of energy. Even if the business owner used the proceeds from increased efficiency to build a wind farm, that results in increased energy use.

step back

This effect being otherwise known as Jevon’s Paradox:


To question the appropriateness of energy efficiency due to the enabling effect on consumption is illogical and short-sighted. If developing the incremental project is economical, then it will be developed regardless of whether any particular developer gains resources to do so. The real issue is that there is some economic incentive to develop that incremental asset and the way to fix that is to take away the incentive, not the means. That needs to come in the form of higher costs/ reduced benefit of that marginal activity.


Crampe’s case study sounds pretty half-baked. While this is an interesting point to ponder, the comparison needs to be made to what WOULD HAVE happened if energy efficiency project not been implemented. The comparison case would show that the original store would still consume a lot of energy, and some other entity would have built another store that would ALSO be consuming a lot of energy (since the new store would not have been built using the energy efficient practices “discovered” by the original developer.

I’m getting so tired of these “energy efficiency is bad” articles that just try to catch our attention for web page hits.

What kind of articles would you rather be interested in? Would be great to hear your thoughts for future articles. Thanks!

Businesses will naturally watch their bottom line and interpret green building credit/guidelines to their benefit. In response, regulators should take a closer look at guidelines as recommended in the article.

Some of the comments do not really make much sense!

The problems we face is that certain countries will not face up to making any changes if it is going to equate to spending money!

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