While the recent initiative signals a much more activist stance for the Environmental Protection Agency (EPA) than their virtually comatose profile during the Bush administration, raising corporate average fuel economy (CAFE) standards for vehicle manufacturers is nothing new.

Anyone who lived through the OPEC shocks of the 1970s can’t help but get a strong sense of déjà vu. We went down that route back then, when CAFE standards rose by over 30 per cent despite the auto industry’s contention that they couldn’t meet the new environmental standards without going bankrupt. To absolutely no one’s surprise, the auto industry was able to meet those levels and survive at the same time. But to virtually everyone’s surprise, we discovered that those impressive efficiency gains neither cut our fuel bills nor lessened our carbon trails.

Your engine may be a lot more efficient that your dad’s old gas-guzzler from the 1970s, but chances are you burn just as much gasoline on the road over the course of a year as he did. You, like your fellow North American drivers, eat up all the energy efficiency gains made in engine and materials technology over the last thirty years by driving ever-larger, ever-faster vehicles loaded with more and more energy-consuming features. And to top it all off, you drive your vehicle about a third more than your parents did, in large measure because you commute so much further every day than they did.

Raising CAFE standards won’t force us to burn less oil or emit less carbon. But the pump prices that will come with the triple-digit oil prices that are just around the corner will make us do both. And, for good measure, those same pump prices should easily enable the auto industry to reach the new bar set for corporate average fuel economy.

That’s because the biggest factor affecting a vehicle manufacturer’s ability to meet the higher North American fuel economy standard is the company’s vehicle mix. When it costs you over $100 every time you fill up your tank, chances are there will be a lot more scooters than SUVs flying off the assembly line.

The first thing I noticed about smart (i.e. off-peak) prices was how expensive dumb (i.e. peak) prices were. At 9.3 cents per kilowatt hour, power ain’t cheap anymore on the grid Sir Adam Beck built from Niagara Falls.

Sure, if I wanted to do my laundry, run the dishwasher and charge my electric car (if I had one) at night, I could get all the juice I wanted at the very reasonable price of 4.4 cents per kilowatt hour. But I might just want to sleep and leave the laundry and dishes for another day and take the bus to work in the morning.

Toronto Hydro’s new smart-pricing initiative is married to Ontario’s new Green Energy Act, which sanctions increased reliance on renewable energy. After gagging on the cost estimates for a couple more reactors, the province backed away from nuclear. And it’s vowing to close down North America’s single largest source of CO² emissions, the Nanticoke coal plant, within the next four years (mind you, the same Ontario government has promised this before).

Tomorrow’s power will come from renewables via a $7 billion deal with Samsung to install wind turbines in the Great Lakes, and to provide solar energy as well.

Many will applaud the addition of this clean and renewable source of power to the grid. Fewer will applaud the 19-cent-per-kilowatt-hour price tag that’ll come along with it.

As they say in stock brokerage, find a strong enough wind, and even pigs can fly. Pay 19 cents per kilowatt hour for power, and you can let the wind turn on the lights. But at that price, how long will you leave them on?

The larger the contribution wind power makes to tomorrow’s grid, the less power you will be able to afford to draw from it—the same way triple-digit oil prices, which will pull tomorrow’s oil supply out of Alberta’s tar sands, will translate into pump prices that’ll force millions of drivers right off the road.

It’s not how many megawatts of additional power new sources like wind add to the grid that counts. Rather, it’s the amount of power demand that a 19-cent–per- kilowatt-hour price will kill that’ll have a far greater effect.

In the end, Ontario’s implicit strategy of future price rationing may be the best energy policy of them all. If power prices keep rising, demand will peak, and maybe then we won’t need to build any new power plants in the first place.

As for my new smart meter, what bears monitoring is how its benchmarks will change. With wind turbines taking over from coal plants, tomorrow’s smart power prices will soon cost more than today’s dumb ones.

Welcome to the brave new world of energy scarcity—it’s not only smaller, but also more costly. As energy prices continue to climb, you can expect to pay more, not less, for all the new energy-efficient cars and devices for your home.

But don’t count on actually saving any energy.

Efficiency may be the holy grail of the economist, but it’s a total head fake for the conservationist. And while one is being used to promote the other, the two concepts are as different as day and night.

The fact that the high-efficiency furnace generates more heat for a given amount of fuel burnt doesn’t necessarily mean I will end up with any fuel savings. As the cost of my heating falls, might it just allow me to set my thermostat higher? If so, my energy savings go right up the chimney.

That’s just where all the energy savings in the auto industry have gone over the last four decades—up the tailpipe, actually. Despite all the efficiency gains mandated by rising CAFE (corporate average fuel economy) standards, your average North American car consumes just as much fuel today as it did back in the early 1970s. Sure, the engine is 30 per cent more efficient, but now it’s hauling around an SUV that’s driven about a third more per year than a vehicle was back then.

And it’s no different in your home. Don’t be fooled by the fact that even today’s kettle has to meet some government-mandated energy-efficiency standard. Your house consumes a lot more energy than your parents’ did.

Even the most energy-efficient central air conditioning system sucks a lot more power than a bedside fan. Those two or three flat-screen TVs you have? Each one consumes about four times as much power as the old black-and-white in your parents’ living room. And while today’s furnace is certainly more energy-efficient than your parents’ was, the size of the average house it’s heating has doubled from the meager 1,500 square feet it was back then.

From our homes to our vehicles, what do we do when greater energy efficiency lowers the cost of consuming energy? We consume more of it, not less. And the rebound created in demand as the cost falls nullifies all the conservation gains that greater efficiency made possible. Paradoxically, efficiency gains encourage us to consume more of the very resource we are trying to conserve.

With that in mind, I told Buddy I was ordering the old mid-efficiency model. Not only does it cost half as much as the high-efficiency furnace, but I’ll probably end up burning less gas as well.