Does increasing fuel efficiency make people drive more?
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.Skip to next paragraph
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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.
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?