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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, Decembrie.
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    Cited by:

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    2. Klemick, Heather & Kopits. Elizabeth & Wolverton, Ann, 2019. "Consumer Valuation of Fuel Economy: Findings from Recent Panel Studies," National Center for Environmental Economics-NCEE Working Papers 283626, United States Environmental Protection Agency (EPA).
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    5. Belloc, Ignacio & Gimenez-Nadal, José Ignacio & Molina, José Alberto, 2024. "The gasoline price and the commuting behavior of US commuters: Exploring changes to green travel mode choices," Journal of Transport Geography, Elsevier, vol. 121(C).
    6. Fidel Gonzalez & Diya Mazumder, 2025. "Do Declining Vehicle Attributes Eliminate the Direct Rebound Effect?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 51(2), pages 198-224, April.
    7. Nehiba, Cody, 2024. "Timing Matters: Estimating within-day variation in the rebound effect," National Center for Environmental Economics-NCEE Working Papers 348907, United States Environmental Protection Agency (EPA).
    8. Cheon, Jiyeon, 2025. "Distributional effects of a vehicle miles traveled tax over the different vehicle efficiency," Economics of Transportation, Elsevier, vol. 41(C).
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    10. 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).
    11. 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.
    12. Fleance George Cocker, 2025. "Mixes of Policy Instruments for the Full Decarbonisation of Energy Systems: A Review," Energies, MDPI, vol. 18(1), pages 1-64, January.
    13. Shi, Hui & Goulias, Konstadinos G., 2024. "Understanding the zero-emission vehicle market spatial diffusion and its determinants from 2019 to 2022 using spatial econometric models," Energy, Elsevier, vol. 313(C).

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