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The Rebound Effect for Passenger Vehicles

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  • Joshua Linn

Abstract

The United States and many other countries are dramatically tightening fuel economy standards for passenger vehicles. Higher fuel economy reduces per-mile driving costs and may increase miles traveled, known as the rebound effect. The magnitude of the elasticity of miles traveled to fuel economy is an important parameter in welfare analysis of fuel economy standards, but all previous estimates from micro data impose at least one of three behavioral assumptions: (a) fuel economy is uncorrelated with vehicle and household attributes; (b) for multivehicle households, each vehicle can be treated as an independent observation in statistical analysis; and (c) the effect of gasoline prices on vehicle miles traveled is inversely proportional to the effect of fuel economy. Two approaches to relaxing these assumptions yield a large estimate of the rebound effect; a one percent fuel economy increase raises driving 0.2 or 0.4 percent, depending on the approach, but the estimates are not statistically significantly different from one another.

Suggested Citation

  • Joshua Linn, 2016. "The Rebound Effect for Passenger Vehicles," The Energy Journal, , vol. 37(2), pages 257-288, April.
    • Handle: RePEc:sae:enejou:v:37:y:2016:i:2:p:257-288
    DOI: 10.5547/01956574.37.2.jlin
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    References listed on IDEAS

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    1. Thomas Klier & Joshua Linn, 2012. "New‐vehicle characteristics and the cost of the Corporate Average Fuel Economy standard," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 186-213, March.
    2. Shanjun Li & Christopher Timmins & Roger H. von Haefen, 2009. "How Do Gasoline Prices Affect Fleet Fuel Economy?," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 113-137, August.
    3. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
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    Cited by:

    1. Mattias Nasman & Grace Ballor, 2024. "The Car Industry and Climate Change: A Historical Review," GREEN Working Papers 24, GREEN, Centre for Research on Geography, Resources, Environment, Energy & Networks, Universita' Bocconi, Milano, Italy.
    2. Mamkhezri, Jamal & Khezri, Mohsen, 2024. "Vehicle miles traveled induced demand, rebound effect, and price and income elasticities: A US spatial econometric analysis," Transport Policy, Elsevier, vol. 158(C), pages 224-240.
    3. Nehiba, Cody, 2025. "Within-day variation in the rebound effect from fuel efficiency standards and implications for road congestion," Transportation Research Part A: Policy and Practice, Elsevier, vol. 199(C).
    4. Zhang, Xiao-Bing & Fei, Yinxin & Duan, Hongbo & Soytas, Ugur & Crifo, Patricia & Sterner, Thomas, 2025. "Implicit discount rates and energy efficiency gap in air conditioning: Evidence from the Chinese market," Resource and Energy Economics, Elsevier, vol. 82(C).
    5. Arpita Asha Khanna & Ilka Dubernet & Patrick Jochem, 2025. "Do car drivers respond differently to fuel price changes? Evidence from German household data," Transportation, Springer, vol. 52(2), pages 579-613, April.
    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).
    9. Zhang, Linlin & van Lierop, Dea & Ettema, Dick, 2025. "The effect of electric vehicle use on trip frequency and vehicle kilometers traveled (VKT) in the Netherlands," Transportation Research Part A: Policy and Practice, Elsevier, vol. 192(C).

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