I’ve thought about this before and had the same question. My most succinct wording is: it’s energy *density* that decreases (energy per unit distance of “wave”), while the wavelengths become longer, hence there is an overall conservation of total energy.
Pure example:
10J of light is emitted at some lazy star, occupying 1 metre of length. Energy density is of course 10J/m
It arrives at you seemingly with lower energy, looking red! The energy density you receive is only 5J/m, but you find it occupies a space of 2 metres (redshifting increases wavelength), and so overall, it must have had 10J of energy.
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