The Generalized Jevons Paradox and the Future of Energy

Global energy and materials are essential to the functioning of the economy and have significant implications for macroeconomics and the environment. At the same time, the world is not on track to meet Paris Agreement goals. This paper documents two stylized facts that connect these observations. First, the world economy is characterized by large embedded emissions and materials: different energies and materials are deeply entwined and interdependent. This has historically led to additive – rather than substitution – dynamics in energy and materials on a global scale. Second, historically there has been a strong positive correlation between efficiency in resource use and total resource use at a global scale. We synthesize these observations by introducing the Generalized Jevons Paradox (GJP). We argue that the GJP reflects the direct and indirect energy/material demand effects of long-term energy and material interdependencies, themselves shaped by market and geoeconomic power, trade arrangements, and financial factors. While future scenarios may diverge from historical data, including because of different population and growth trends, the GJP calls for caution in projecting energy and material flows within the energy transition framework, as it suggests that a declining share of fossil fuels in primary energy consumption can coexist with rising total fossil consumption, and thus rising global emissions – as observed since 2012. The GJP highlights the importance of policies to better allocate energy and material flows across sectors and countries and reduce supply chain vulnerabilities, but raises difficult distributional and political economy questions. Based on the GJP, the paper identifies three areas for research: the detailed analysis of the role of materials in supply chain vulnerabilities; the political economy of material flows; and multidimensional welfare analysis in decarbonization scenarios.