Does increasing fuel efficiency make people drive more?
By Eoin O'Carroll | 05.22.09
President Obama’s push to tighten fuel-efficiency standards for US autos highlights a counterintuitive but well-established fact of energy economics: When you reduce the need for a fuel, you also reduce its cost, thereby increasing demand.
In other words, mandating cars that burn less gas will make driving cheaper, encouraging us all to drive more. Economists call this the “rebound effect.”
We saw the reverse of this effect a year ago. As gas prices skyrocketed, Americans began driving less. According to numbers from the US Department of Transportation, Americans drove 4.7 percent less in June 2008, when prices were crowding $4 a gallon, than they did in June 2007, when the cost was more like $3.
But does it work in the other direction? In fact, could the rebound effect from fuel efficiency be so intense that consumption would bounce, flubberlike, to a point higher than it was in the first place?
It’s something an article of faith among some hardline capitalist types that this is exactly what happens. Last month Jeff Jacoby, a conservative columnist for The Boston Globe, penned a two-part op-ed that concluded that “[i]f greens and global-warmists really want the US automotive fleet to use less energy, they should clamor for cars that get lower mileage.”
Mr. Jacoby unpacked this line of reasoning in the follow-up column, in which he noted that oil consumption continued to rise precipitously in the US even after Congress enacted the Corporate Average Fuel Economy standards in 1975.
Jacoby credits the 19th-century British economist William Stanley Jevons as being among the first to observe this phenomenon. In his 1865 book, “The Coal Question,” Jevons noted that James Watt’s efficient steam engine, instead of causing coal consumption to drop, actually ended up increasing it because it made coal a more viable energy source.
The idea that CAFE standards produce the opposite of their intended effect has been repeated by a number of pro-free-market outfits over the years, from the Heritage Foundation back in 2001 to the Reason Foundation in 2005 to libertarian commentator Lew Rockwell’s website just this week.
It also surfaced in a Tuesday story in USA Today titled “New fuel-economy rules could backfire if people drive more.” The story settles down after the headline, but the casual reader couldn’t be blamed for walking away with the impression that Obama’s plan could, well, backfire.
Which is unlikely, given evidence of people’s past driving habits. The rebound effect is indeed real, but it is not nearly large enough to negate all the gains made by increasing mileage. There’s no evidence that doubling our m.p.g. would make us all drive more than twice as much. People just aren’t that fond of sitting in traffic.
How big is the actual effect? I asked Jim Kliesch, a clean-vehicle expert with the Union of Concerned Scientists, who has reviewed a number of studies on the subject. He walked me through the math, and we calculated that doubling fuel economy would increase driving for the average person by a little over 7 percent.
“It is certainly not of the magnitude to have any significant impact on energy savings,” he said.
What’s more, the effect appears to have been falling over time. A 2007 paper by economists Kenneth A. Small and Kurt Van Dender, both of the University of California, Irvine, found that the rebound effect is now about half of what it once was.
How about you? If gas were free, how much more would you drive?
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2. Vincent Tomecek | 05.22.09
Your blog entry highlights an important point of economics … there is no silver bullet. Nobody can pull just one economic lever and expect drastic changes. So what if fuel-efficiency standards are tightened WHILE we raise the federal gasoline taxes. The increase in gasoline costs would balance the CAFE rebound effect and provide the government with another revenue source to sponsor even more energy advancement. Perhaps Obama is just tackling one thing at a time so he doesn’t grab the political 3rd rail in a single day.
If gas were free, it makes no difference to me. I don’t own a car and love biking far. I can’t deny that if gas were gratis, consumer goods prices would certainly decrease.
3. Dr. Gary | 05.22.09
Gas is such a small part of the driving expense equation.
Depreciation, insurance, interest costs, acquisition and trade-in expenses, maintenance, tires–well, you can see the list doesn’t stop.
Taking gas as a percentage of your monthly operating cost, what is it, 12-15%?
So, impacting that figure by doubling the mileage or halving the cost of fuel really delivers a small amount of savings.
Mass transport, on the other hand, is more promising.
4. Olivia | 05.23.09
Welcome back, Eoin. Missed you!
Having sold my car (’81 diesel) a couple years ago, I wouldn’t drive more if gas were free or lots cheaper. It costs too much to maintain a car ex-fuel. However, I might drive halfway across the country in a rental car instead of fly, if the price were right. That said, I’m as conscious of conserving earth’s resources for the world’s sake as I am of not wasting money for my own sake. If that makes sense.
5. mjpmarty | 05.23.09
The fallacy of reducing consumption by higher mileage standards was proven false over twenty years ago. In the late sixties cars were getting ten to twelve miles per gallon. By the eighties averages were over twenty mpg but people drove more and used more gasoline. East coast yuppies and their public transport are all nice and eco-friendly but how about folks in the desert southwest who drive a hundred miles a day to and from work? How about those of us who drive for pleasure and with higher fuel economy will just be able to drive more? You greenies need to work on changing human behavior rather than manipulating the CAFE laws. Freedom of choice is more important to most folks than “saving the planet”. You eco-freaks are like a bunch of fleas on a dogs back arguing over who owns the dog.
7. MikeHawaii | 05.24.09
I wonder if someone would like to also show that increasing CAFE standards does NOT result in smaller cars and more highway deaths? In virtually any other issue supported by extreme environmentalists, the loss of just a single human life has been cause for banning positive things like DDT. I guess it doesn’t apply to mandating lower safety standards by forcing the production of smaller cars.
Why can’t we reject the false premise that CO2 causes dangerous global warming? There is no observational evidence to support the theory. Would someone please show us the evidence? Without evidence, none of you who support this position know what you are talking about.
8. Dave Summers (Heading Out) | 05.25.09
I believe you misunderstand the application of Jevons Paradox. In his original example, Jevons pointed out (as you note) that increasing the efficiency of a locomotive led to an increase in coal demand for coal, their fuel supply.
But you have considered that increasing efficiency would increase the mileage driven by an individual vehicle. That is not what he said, nor, realistically what will happen. Rather it is that by lowering the cost of locomotives, people used more of them, and thus demand rose, not that an individual locomotive drove more miles.
Relevant to the current debate the example is the Tata Nano (http://tatanano.inservices.tatamotors.com/tatamotors/) - by improving manufacturing efficiency to create a car cheap enough for a lower stratum of Indian society (and later the world) their ability to afford the car will drive up gas consumption.
There are many examples - computers, i-pods, cell phones etc etc. It is in the marrying of price with improved efficiency that provides the engine for the Paradox.
9. Carlyle Moulton | 05.26.09
But if someone does each year drive their new Toyota Prius further than they drove the Hummer that the Prius replaced, that person each year is getting the benefit of more distance travelled. Isn’t allowing people to travel further at less cost a benefit that these loony economists support?
The fact is that there is a certain kind of person who is against any thing that Greenies support on principle. Burning coal and wood chipping whole forests are good things to do precisely because the hated Greenies oppose them, just as single payer medical care must be opposed because it is supported by anti-American anti-capitalist pinko deviant traitors. These people will seize on any argument to oppose doing anything about global warming, no matter how silly it is.
If more efficient cars do in fact cause people to drive more this will counteract the effect of rising oil prices, which will come sooner or later, cause people to drive less and lower living standards. Increased fuel efficiency is a requirement for preserving the standard of living against the inevitable scarcity and rising costs of petroleum.
10. Carlyle Moulton | 05.26.09
Anyway if the rebound effect is excessive, governments can always counter it by increasing taxes on fuel or costs of car registration.
11. Mike Johnson | 05.26.09
You make a very good point Dave, particularly about the Tata Navo. If we are worried about GLOBAL warming/climate change/cooling/whatever we should be mindful that the cheaper it is for people to own and use cars world-wide, the more people will. If we just look at the US, our current automotive market is nearly saturated (in terms of number of cars & miles driven), but dramatic reductions in automotive cost will allow other nations without saturated automotive markets to suddenly grow. Ultimately this could negate or worsen CO2 emissions and other pollutants.
Ultimately this points out that no amount of efficiency will solve the CO2 problem (assuming it exists). Basically if man-made climate change is real, we will need fundamentally new technologies to fix it. Until we can figure out good electric powered transportation & nuclear fusion, we are basically SOL.
12. fred | 05.27.09
@mjpmarty
“By the eighties averages were over twenty mpg but people drove more and used more gasoline.”
In 1975, before the Second Oil Shock and the institution of CAFE standards, U.S. per capita gasoline consumption from the use of light vehicles was 432 gallons. It wasn’t until 1996 — more than 20 years later — that that level was exceeded.
13. fred | 05.27.09
@MikeHawaii
“I wonder if someone would like to also show that increasing CAFE standards does NOT result in smaller cars and more highway deaths?”
In 1975, before CAFE standards were instituted, highway fatalities in light vehicles were 0.0001425 per capita and 0.00000002493 per vehicle-mile traveled. By 1985, when CAFE standards leveled off for automobiles, the former number had declined by 12% and the latter number had declined by 27%.
In fact, the five year period between 1980 and 1985 saw the largest drop during a five year period, by far, in driving fatality rates per vehicle-mile in US history. It was during the heart of the SUV boom of the mid-90s that that rate actually countered trends and increased for a few years, while the combined CAFE standard for cars and trucks declined slightly.
14. Ray | 05.30.09
To think that we should not do everything in our power to reduce the amount of gasoline consumed in this country for any reason borderlines absurdity. We are creatures of habit and driving is a habitual act. People will not change their mindset to “I’m using less gas in this vehicle so I think I’ll go out and drive some more today”.
You have to keep in mind one disgusting fact. OPEC controls the supply, so if we decrease our consumption they will decrease the supply. This is happening right now as we discuss this issue. When the economy curtailed the demand and the price dropped to below $2.00 per gallon they simply cut the supply (2.2 million BPD in 12/08) and now we are back up to over $2.60 per gallon. So in the end we will be consuming less but paying the same or more per gallon.
We must reduce our fossil fuel consumption, and dependency on foreign resources. The President could have gone a step further and proposed the partial elimination of gasoline powered vehicles by 2016.
15. Kevin | 06.13.09
ok, guys i work for a car manufacturer so what happens at this point will impact my future. (immediate). However, it will (may) also impact my children, grandchildren and so on. Fuel efficiency is a good thing and whether it is backed with scientific fact or other analytical data we should always err to the side of what “might” be the best for our future. With that said, our forefathers understood full well we were all….ALL…are endowed by their creator with certain unalienable rights. The govenment–which is what is driving/mandating now are infringing more and more daily. Let the free market drive. Lets concentrate on the root cause of the issue at hand. Human behavior. Greed in all…ALL…cases drives damage to the environment. If we only deal with the question of “how do we stop those who are greedy” then we’re only treating the symptom of a deeper issue. Focus on people and behavioral change and responsibility…..and a green eviroment will take care of itself. what if we all decided to go there and worked together instead of arguing about the enviroment all day? wow, talk about fresh air and fresh thinking
Trackbacks/Pingbacks
1. Cool Green Science: The Conservation Blog of The Nature Conservancy » Cool Green Morning: Tuesday, May 26 | 05.26.09
2. Kicking the Tires on the ‘Rebound Effect’ and the New CAFE Standards - The Numbers Guy - WSJ | 05.26.09
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1. JAM | 05.22.09
To drive more would involve a change of lifestyle, and I’m afraid it’d take more than a different car to spur that change for me - as the writer aptly noted, I’m not fond of sitting in traffic. Were I a Prius owner and planning a road trip with friends, I’d insist on being the driver, though.