Estimating Direct Rebound Effects for Personal Automotive Travel in Great Britain

Abstract

Direct rebound effects result from increased consumption of cheaper energy services. For example, more fuel-efficient cars encourage more car travel. This study is the first to quantify this effect for personal automotive travel in Great Britain. We use aggregate time-series data on transport activity, fuel consumption and other relevant variables over the period 1970-2011 and estimate the direct rebound effect from the elasticity of vehicle kilometres with respect to: a) vehicle fuel efficiency (km/MJ); b) the fuel cost of driving (£/km); and c) road fuel prices (£/MJ). We estimate a total of 54 models, paying careful attention to methodological issues and model diagnostics. Taking changes in fuel efficiency as the explanatory variable, we find no evidence of a long-run direct rebound effect in Great Britain over this period. However, taking changes in either the fuel cost of driving or fuel prices as the explanatory variable we estimate a direct rebound effect in the range 10% to 27% with a mean of 18%. This estimate is consistent with the results of US studies and suggests that one fifth of the potential fuel savings from improved car fuel efficiency may have been eroded through increased driving. We also show how the normalisation of distance travelled (per capita, per adult or per driver) affects the results obtained.

Keywords: rebound effect, fuel efficiency, robustness, peak car

JEL Classification: R41, Q41