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Can vehicle efficiency beat fuel efficiency in cutting fuel use

Author

Listed:
  • Gioele Figus

    () (Centre for Energy Policy, University of Strathclyde)

  • J Kim Swales

    () (Department of Economics, University of Strathclyde)

Abstract

This paper demonstrates the importance of considering both energy and non-energy efficiency improvements in the provision of energy intensive household services. Using the example of private transport, we analyse whether vehicle efficiency can beat fuel efficiency in cutting fuel use. We find that this ultimately depend on the elasticity of demand for transport, the substitutability between vehicles and fuels and the initial share of fuel use in private transport. The framework also allows to identify ‘multiple benefits’ of technical progress in private transport by considering both the ability of such policy to reduce fuel demand and to increase the consumer’s surplus. We extend the partial equilibrium framework by using computable general equilibrium (CGE) simulations to identify the system-wide impacts on total fuel use of the two alternative efficiency changes. Simulation results suggest that the substitution effects identified in the partial equilibrium analysis are an important element in determining the change in total fuel use resulting from these consumption efficiency changes. However, the identification of associated changes in intermediate fuel demand, plus the potential expansionary effects of the improvements in household efficiency transmitted through the labour market can generate general equilibrium effects that vary substantially from those derived using partial equilibrium analysis.

Suggested Citation

  • Gioele Figus & J Kim Swales, 2018. "Can vehicle efficiency beat fuel efficiency in cutting fuel use," Working Papers 1802, University of Strathclyde Business School, Department of Economics.
  • Handle: RePEc:str:wpaper:1802
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    File URL: https://www.strath.ac.uk/business/economics/research/discussionpapers/
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    More about this item

    Keywords

    energy services; technical progres; energy efficiency; partial equilbrium; general equilibrium;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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