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Demand for New Car Fuel Economy in the UK, 1970-2005

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  • David Bonilla
  • Timothy Foxon

Abstract

During the past thirty years, governments have sought to stimulate improvements in new car fuel economy to contribute to air quality, energy security, and climate change goals. We analysed the demand for new car fuel economy in the UK using a two-stage econometric model to investigate the drivers of this demand in the short and long terms over the period 1970-2004. We found that higher incomes and long-term price changes were the main drivers to achieve improvements in fuel economy, particularly for petrol cars, and that new car fuel economy changes were scarcely affected by the Voluntary Agreement on CO 2 emissions reductions adopted in the 1990s. We found, in agreement with other studies, that the demand for fuel economy was price inelastic for both fuels. Our calculated long-term income elasticity (petrol with −0.31 and diesel fuels with −0.20) values are above the range of international studies for petrol but within the range for diesel. An aggregate model of fuel economy gives a fuel price elasticity of −0.32 and an elasticity of −0.26 with respect to UK disposable income. © 2009 LSE and the University of Bath

Suggested Citation

  • David Bonilla & Timothy Foxon, 2009. "Demand for New Car Fuel Economy in the UK, 1970-2005," Journal of Transport Economics and Policy, University of Bath, vol. 43(1), pages 55-83, January.
    • Handle: RePEc:tpe:jtecpo:v:43:y:2009:i:1:p:55-83
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    Citations

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    Cited by:

    1. Broadstock, David C. & Hunt, Lester C., 2010. "Quantifying the impact of exogenous non-economic factors on UK transport oil demand," Energy Policy, Elsevier, vol. 38(3), pages 1559-1565, March.
    2. Mishalani, Rabi G. & Goel, Prem K. & Landgraf, Andrew J. & Westra, Ashley M. & Zhou, Dunke, 2014. "Passenger travel CO2 emissions in US urbanized areas: Multi-sourced data, impacts of influencing factors, and policy implications," Transport Policy, Elsevier, vol. 36(C), pages 231-241.
    3. Weber, Sylvain, 2019. "Consumers' preferences on the Swiss car market: A revealed preference approach," Transport Policy, Elsevier, vol. 75(C), pages 109-118.
    4. Mahlia, T.M.I. & Tohno, S. & Tezuka, T., 2012. "History and current status of the motor vehicle energy labeling and its implementation possibilities in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 1828-1844.
    5. Wadud, Zia, 2014. "New vehicle fuel economy in the UK: Impact of the recession and recent policies," Energy Policy, Elsevier, vol. 74(C), pages 215-223.
    6. Manuel Llorca & José Baños & José Somoza & Pelayo Arbués, 2017. "A Stochastic Frontier Analysis Approach for Estimating Energy Demand and Efficiency in the Transport Sector of Latin America and the Caribbean," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    7. Tovar, Miguel A., 2011. "An integral evaluation of dieselisation policies for households' cars," Energy Policy, Elsevier, vol. 39(9), pages 5228-5242, September.
    8. Liddle, Brantley, 2012. "The Systemic, Long-run Relation among Gasoline Demand, Gasoline Price, Income, and Vehicle Ownership in OECD Countries: Evidence from Panel Cointegration and Causality Modeling," MPRA Paper 52081, University Library of Munich, Germany.
    9. Torriti, Jacopo, 2012. "Demand Side Management for the European Supergrid: Occupancy variances of European single-person households," Energy Policy, Elsevier, vol. 44(C), pages 199-206.
    10. de Freitas, Luciano Charlita & Kaneko, Shinji, 2011. "Ethanol demand under the flex-fuel technology regime in Brazil," Energy Economics, Elsevier, vol. 33(6), pages 1146-1154.
    11. Fageda, Xavier & Flores-Fillol, Ricardo & Theilen, Bernd, 2022. "Price versus quantity measures to deal with pollution and congestion in urban areas: A political economy approach," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    12. Bonilla, David & Schmitz, Klaus E. & Akisawa, Atsushi, 2012. "Demand for mini cars and large cars; decay effects, and gasoline demand in Japan," Energy Policy, Elsevier, vol. 50(C), pages 217-227.

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