Jevons paradox: why efficiency gains could be undermining your net zero targets

The transition to a net zero economy may be the most significant industrial shift since the Industrial Revolution. For many organisations, the transition is typically approached through a combination of greater efficiency, electrification, and the adoption of low-carbon energy sources, with nature-based solutions often used to support residual emissions reduction. Efficiency is therefore at the core of many net zero strategies – and while essential, it can backfire if not managed correctly, as Jevons Paradox suggests.

Understanding Jevons paradox

For modern businesses, understanding this paradox is a necessity for decarbonisation goals. It describes how technological improvements that increase the efficiency of a resource can paradoxically drive a rise, rather than a fall, in its total consumption. It was first articulated in 1865 by William Stanley Jevons who observed that more efficient steam engines did not save coal. Instead, they made coal so cost-effective that its use expanded across new industries.

This happens because of the rebound effect: when consumption of a resource increases as a result of attempts to decrease it by making efficiency gains. A typical example is fuel-efficiency in vehicles – as vehicles become more fuel-efficient, people may respond by driving more. In its most extreme form, this becomes the Jevons Paradox, where improvements that increase efficiency ultimately lead to higher overall resource consumption.

Rebound effects may be direct, occurring within the same service. For example, when a logistics company expands its delivery area because its fleet uses fuel more efficiently. They may also be indirect, e.g. when financial savings are reinvested into other energy demanding activities such as hiring more staff or purchasing new equipment. If left unmanaged, these effects can undermine decarbonisation strategies and make progress towards net zero objectives more difficult.

This relationship between improved efficiency, reduced costs, and rising demand shapes patterns of consumption across sectors and organisations. When technological improvements allow a resource to be used more efficiently, the amount of output generated from each unit of that resource increases, effectively raising its productivity. As the cost per unit of output falls, demand for the product, commodity, or service often rises. This lower cost can then lead to a disproportionate increase in overall usage, frequently offsetting the per-unit savings that efficiency measures were intended to achieve. More broadly, Jevons Paradox shows that the savings created through greater efficiency are rarely left unused. Instead, they are often used to lower prices resulting in increased demand, or are reinvested to expand production or enter new markets, each of which brings additional energy demands.

The Hidden Cost of Efficiency

In today’s landscape, the most prevalent example of this dynamic is the expansion of digital infrastructure and AI, where the technology optimises resources but simultaneously drives a sharp surge in energy demand and electronic waste. For example, the industry recently experienced what some call a "DeepSeek moment" for Graphics Processing Units (GPUs) – a computer processor designed to speed up the creation of images and videos. Breakthroughs in model efficiency made computer power cheaper and more capable.

Yet, rather than reducing overall energy use, these efficiencies enabled the training of even larger models and the use of AI in applications that were previously too expensive to implement. While energy efficiency for AI hardware improves by roughly 15% per year, total energy consumption in the sector continues to rise at approximately 25% year-on-year. Projections now indicate that global data centre electricity demand could double by 2030, reaching levels equivalent to Japan’s total annual electricity consumption.

What can businesses do?

For many organisations, the path to net zero is currently obscured by a reliance on "intensity targets" rather than "absolute targets." While intensity metrics such as emissions per unit of product, highlight efficiency improvements, they do not guarantee a reduction in total carbon emissions. A company can report a 20% improvement in intensity while absolute emissions rise because production volume increased by 50%. In fact, the Science Based Targets initiative (SBTi) and other prominent organisations have noted that economic-intensity targets often result in increased absolute emissions for fast-growing companies, consequently, new recommendations now focus on absolute reduction goals.

We should also shift focus from relative efficiency ratios to tracking total annual energy consumption in absolute terms, such as kilowatt-hours per year, to determine whether efficiency gains are being overwhelmed by rising demand. Therefore, businesses must adopt a more holistic strategy that considers absolute emissions and broader environmental impacts. 

This includes setting absolute reduction targets and implementing tools such as internal carbon pricing, which places a monetary value on each tonne of CO2 emitted. However, its effectiveness depends on the price being sufficiently high to shape investment decisions. If set too low, efficiency savings may still be redirected towards expansion and additional resource consumption

It is also crucial to adopt sufficiency-based strategies that aim to reduce overall resource use, rather than relying solely on efficiency improvements. Examples include reducing the need for travel through remote work and designing products for durability and repairability. 

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Ultimately, navigating the Jevons Paradox is not a task for a sustainability department alone, it requires a collaborative approach, e.g. with ethical committees overseeing the deployment of resource intensive technologies to ensure they serve genuine needs. By actively managing the rebound effect, we can ensure that, as we integrate efficiency, it leads to genuine environmental benefits rather than simply creating a more efficient path to climate degradation.

Membership bodies such as trade associations and professional bodies are uniquely positioned to help their members understand the practicalities of the Jevons Paradox and how that translate into sustainability strategies. By having a sector-wide reach, they can identify practical sector solutions and guidance that members need for a smooth green transition. Climate Action for Associations (CAFA) provides the tools, resources, and support membership organisations need to provide that necessary help to their members. By joining our free membership, you can access the frameworks and support to guide members towards sustainability. Join CAFA today.