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Does increasing fuel efficiency make people drive more?

By Blogger for The Christian Science Monitor / May 22, 2009

Rows of Saturn SUVs on sale at a car lot in Los Angeles.

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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.

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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.

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