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01.07.2009

Traveled distance, stock and fuel efficiency of private vehicles in Canada: price elasticities and rebound effect

verfasst von: Philippe Barla, Bernard Lamonde, Luis F. Miranda-Moreno, Nathalie Boucher

Erschienen in: Transportation | Ausgabe 4/2009

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Abstract

This paper presents estimates of the rebound effect and other elasticities for the Canadian light-duty vehicle fleet using panel data at the provincial level from 1990 to 2004. We estimate a simultaneous three-equation model of aggregate demand for vehicle kilometers traveled, vehicle stock and fuel efficiency. Price and income elasticities obtained are broadly consistent with those reported in the literature. Among other results, an increase in the fuel price of 10% would reduce driving by ~2% in the long term and by 1% the average fuel consumption rate. Estimates of the short- and long-term rebound effects are ~8 and 20%, respectively. We also find that an increase in the gross domestic product per capita of 10% would cause an increase in driving distance of 2–3% and an increase of up to 4% in vehicle stock per adult. In terms of policy implications, our results suggest that: (1) the effectiveness of new fuel efficiency standards will be somewhat mitigated by the rebound effect and (2) fuel price increases have limited impacts on gasoline demand.

Vorheriger Artikel Variation of households’ car ownership across time: application of a panel data model

Nächster Artikel A copula-based joint multinomial discrete–continuous model of vehicle type choice and miles of travel

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Indeed, Parry and Small (2005) showed that fuel taxes in Britain exceed its second best optimal level while the opposite holds true in the US.

For example, a rebound effect of 20% means that a 10% improvement in fuel economy leads to an 8% decline in gasoline consumption only. In other words, increased driving reduces by 20% the effectiveness of fuel efficiency improvement.

Note that we are not arguing here that large reductions in GHG emissions should be made in the transportation sector. Indeed, reductions should be made where abatement costs are lower (see Parry et al. 2007).

It is not possible from the reported results to derive her estimate of the long term rebound effect.

Note that there are also a few Canadian studies using disaggregated data at the household level (see Berkowitz et al. 1990; Yatchew and No 2001; Nicol 2003). These studies find price elasticities that are much higher than those obtained with aggregated data. This difference is, however, not unique to Canada as underlined by Goodwin et al. 2004.

The inclusion of a 1 year lag of the endogenous variable is equivalent to including lags on all the exogenous variables (see Green 2003).

Data on gasoline prices are not directly available at the provincial level. Instead, an index for regular gasoline price set at 100 for all provinces in 1992 was used. Differences in gasoline price across provinces in 1992 are controlled through the provincial specific effects.

In fact, the short-term rebound effect can be approximated by −α₃. See Small and Van Dender (2007).

The model was also tested using net personal income instead of GDP per capita. The results were close, except in the stock equation where this variable had no significant impact. It is likely that GDP per capita is a better measure of the general level of economic activities. Also, note that study data also included business related vehicles activities.

We also tested the impact of the population age structure (% of population over 65 and % of children) as well as the road network size. These variables were never statistically significant. Their impacts are likely already captured by the provincial specific effects.

The Northwest Territories, Yukon and Nunavut are grouped with the Province of British Columbia.

These surveys are: (1) the National Private Vehicle Use Survey (NPVUS) with data from the 4th trimester of 1994 to the 3rd trimester of 1996, and (2) the Canadian Vehicle Survey (CVS) with data from the 4th trimester of 1996 and later. Based on these surveys, NRCan estimates distance driving by vehicle class. However, these distances are adjusted by comparing the estimated fuel consumption obtained from these distances (combined with the fuel rating) and the actual data on fuel consumption.

A Hausman test was carried out to compare FE versus random effects model. In the latter, it is assume that the provincial effects are not correlated with the included explanatory variables. This test clearly rejected the random effects model for the three equations (KM, SA and CR).

In fact, the FE estimators are biased because the within transformation leads to new error terms that are still correlated with the lag endogenous variables (see Baltagi 2005).

Using lags of the endogenous variables may be problematic when there is serial correlation.

Furthermore, SVD found that results are similar when adopting a full information approach.

GMM estimators were also considered. However, since GMM uses much more instruments than 2SLS, it may not be performing adequately with our short panel. In any case, very similar results were obtained when using GMM.

For example in FE-2SLS, the long-term effect is ~2.1 greater than the short-term effect [i.e., 1 / (1−0.5711)]. This is an approximation, since feedback effects associated with the changes in the other part of the system were ignored. Note, however, that these indirect effects are negligible.

Given that the indirect effects originating from the other equations are marginal, the rebound effect in the short and long term are approximately equal to α₃ and α₃/(1−α₁), respectively—for details see Small and Van Dender (2007).

These elasticities can be obtained by adding KA and CR elasticity. Note that since the model is not estimated using the full information method, no standard deviation can be reported for these estimates.

Estimating the model for two sub-periods (1990–1998 and 1999–2004), no significant shift in elasticities was ascertained. We also examined if elasticities vary depending upon the province’s economic strength. Once again the evidence is inconclusive. Note that the timeframe of our data includes rising gasoline prices which could very well lead to more demand reactivity.

Austin, D., Dinan, T.: Clearing the air: the costs and consequences of higher CAFE standards and increased gasoline taxes. J. Environ. Econ. Manag. 50, 562–582 (2005)CrossRef

Baltagi, B.: Econometric analysis of panel data, 3rd edn. Wiley, New York (2005)

Berkowitz, M.K., Gallini, N.T., Miller, E.J., Wolfe, R.A.: Disaggregate analysis of the demand for gasoline. Can. J. Econ. 23(2), 253–275 (1990)CrossRef

Eltony, M.: Transport gasoline demand in Canada. J. Transp. Econ. Policy 27, 193–208 (1993)

Fischer, C., Harrington, W., Parry, I.: Should automobile fuel economy standards be tightened? Energy J. 28(4), 1–29 (2007)

Gallini, N.: Demand for gasoline in Canada. Can. J. Econ. 16, 299–324 (1983)CrossRef

Goodwin, P., Dargay, J., Handly, M.: Elasticities of road traffic and fuel consumption with respect to prices and income: a review. Transp. Rev. 24(3), 275–292 (2004)CrossRef

Green, W.H.: Econometric analysis, 5th edn. Prentice Hall, Upper Saddle River (2003)

Johansson, O., Schipper, L.: Measuring the long-run fuel demand for cars. J. Transp. Econ. Policy 31(3), 277–292 (1997)

Nicol, C.J.: Elasticities of demand for gasoline in Canada and the United States. Energy Econ. 25(2), 201–214 (2003)CrossRef

Parry, I., Small, K.: Does Britain or the United States have the right gasoline tax? Am. Econ. Rev. 95(4), 1276–1289 (2005)CrossRef

Parry, I., Harrington, W., Walls, M.: Automobile externalities and policies. J. Econ. Lit. XLV, 374–400 (2007)

Portney, P.R., Parry, I.W.H., Gruenspecht, H.K., Harrington, W.: The economics of fuel economy standards. J. Econ. Perspect. 17(4), 203–217 (2003)CrossRef

Small, K.A., Van Dender, K.: Fuel efficiency and motor vehicle travel: the declining rebound effect. Energy J. 28(1), 25–51 (2007)

Yatchew, A., No, J.O.: Household gasoline demand in Canada. Econometrica 69, 1697–1709 (2001)CrossRef

Titel: Traveled distance, stock and fuel efficiency of private vehicles in Canada: price elasticities and rebound effect
verfasst von: Philippe Barla
Bernard Lamonde
Luis F. Miranda-Moreno
Nathalie Boucher
Publikationsdatum: 01.07.2009
Verlag: Springer US
Erschienen in: Transportation / Ausgabe 4/2009
Print ISSN: 0049-4488
Elektronische ISSN: 1572-9435
DOI: https://doi.org/10.1007/s11116-009-9211-2

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