The Hidden Dangers of Energy Efficiency

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 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.  

mall 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.   

lanfill 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. 

Chris Tobias is Celsias Editor-at-Large and Lead Strategist at Forward.  Follow him on Twitter.

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2 comments

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Matt (anonymous)

This article makes it sound like economic growth is such a terrible thing. Rather than pointing out the dangers of increased consumption, how about suggesting ways to make it more sustainable, while still allowing for future growth.

Written in November 2009

Matt, I think that is the million dollar question. I think we need a new paradigm, rather than unchecked growth. Ultimately, that is the point I'm trying to make. We need a rethink. It's not about "more sustainable" (e.g. less bad) so much as it is finding ways to do "more good" (e.g. new, revolutionary, innovative shifts away from polluting practices).

Written in November 2009

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  • Posted on Nov. 18, 2009. Listed in:

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