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Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect

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  • Kenneth A. Small
  • Kurt Van Dender

Abstract

We estimate the rebound effect for motor vehicles, by which improved fuel efficiency causes additional travel, using a pooled cross section of US states for 1966-2001. Our model accounts for endogenous changes in fuel efficiency, distinguishes between autocorrelation and lagged effects, includes a measure of the stringency of fuel-economy standards, and allows the rebound effect to vary with income, urbanization, and the fuel cost of driving. At sample averages of variables, our simultaneous-equations estimates of the short- and long-run rebound effect are 4.5% and 22.2%. But rising real income caused it to diminish substantially over the period, aided by falling fuel prices. With variables at 1997-2001 levels, our estimates are only 2.2% and 10.7%, considerably smaller than values typically assumed for policy analysis. With income and starting fuel efficiency at 1997-2001 levels and fuel prices 58 percent higher, the estimates are still only 3.1% and 15.3%, respectively.

Suggested Citation

  • Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, , vol. 28(1), pages 25-52, January.
    • Handle: RePEc:sae:enejou:v:28:y:2007:i:1:p:25-52
    DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No1-2
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    References listed on IDEAS

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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    2. Gerard de Jong & Hugh Gunn, 2001. "Recent Evidence on Car Cost and Time Elasticities of Travel Demand in Europe," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 137-160, May.
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    Cited by:

    1. Huntington, Hillard G., 2024. "US gasoline response to vehicle fuel efficiency: A contribution to the direct rebound effect," Energy Economics, Elsevier, vol. 136(C).
    2. Tufan Özsoy, 2024. "The “energy rebound effect” within the framework of environmental sustainability," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 13(2), March.
    3. Sheldon, Tamara L. & Dua, Rubal, 2024. "The dynamic role of subsidies in promoting global electric vehicle sales," Transportation Research Part A: Policy and Practice, Elsevier, vol. 187(C).
    4. Nehiba, Cody, 2024. "Electric vehicle usage, pollution damages, and the electricity price elasticity of driving," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).

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