Revisiting the Jevons Paradox of Energy Economics: Empirical Evidence from Bangladesh and India

Muntasir Murshed

The significance of enhancement in energy consumption in order to boost the respective national output level within any economy cannot be denied. Moreover, the United Nation’s 2030 Sustainable Development agenda had also called for an improvement in efficiency of energy-use through the adoption of renewable energy technologies in particular, with the ultimate goal of attaining sustainability in global energy supply. The rationale behind escalating the associated efficiency levels is that by doing so the level of energy consumption can be reduced which would complement the direct energy conservation policies as well. However, there has been ambiguity with regard to the precise relationship between efficiency in use and consumption of energy. The aim of this paper is to shed light on the energy efficiency-energy consumption nexus in context of the two South Asian Lower Middle-Income Countries, Bangladesh and India. The study makes a novel attempt at investigating the ‘Jevons Paradox’ by disaggregating energy consumption into primary and secondary energy consumption and by expressing each of these as separate functions of energy-use efficiency and other control variables. This study considers annual data stemming from 1990 to 2016 and employs Fixed Effects (FE), Random Effects (RE) and Three-Stage Least Squares (3SLS) panel regression tools for robustness check. Furthermore, the paper also analyses the long run causal linkages using the Granger causality tests. In light of the estimated results, evidence of a Jevons paradox is found in the context of non-renewable energy, electricity and coal consumption. In addition, no long-run causal association is found to exist.

DOI : https://doi.org/10.21102/irbrp.2018.03.141.05