Energy Efficiency Versus Consumption: An Empirical Investigation of Jevons’ Paradox Across Sectors in India

Abstract

Modernisation theorists reiterate endogenous growth models by acknowledging technological production for a rise in the efficiency of energy-use. Yet, world system analysts blame economic production for causing environmental degradation. As economic and demographic modernisation continue to raise the magnitude of extraction despite their declining economic intensity, the dichotomy draws attention to Jevons’ paradox. Debates ingeminating ‘The End of Cheap Oil’ raise arguments about India’s energy deficit despite measures to raise its energy self-sufficiency. Do policies aiming at reducing energy consumption through efficiency enhancement fulfil their targets or does the reality reverse the objectives of the policy? Focusing on the two pillars of energy policy (efficiency-demand and supply), Ordinary Least Square (OLS) technique and Granger causality have been employed to model the energy efficiency–consumption nexus and other determinants of energy consumption, across sectors. The magnitude of energy intensity effect is stronger in the agricultural sector than the other sectors. This analysis records evidence of Sectoral Rebound effects confirming Jevons’ paradox, whereby the economy’s energy mix which is strongly inclined towards non-renewable resources combined with the demand for green energy and efficiency, clearly supports the government’s recent policy moves in the direction of renewable energy generation and electricity substitution. JEL Codes: O13, Q42, Q43, Q48