Traveled Distance, Stock and Fuel Efficiency of Private Vehicles in Canada: Price Elasticities and Rebound Effect

One shortcoming of a fuel efficiency policy is that works against itself by lowering operating costs as it stimulates driving--a "rebound effect." In this paper, estimates of the rebound effect and other elasticities are presented for the Canadian light-duty vehicle fleet. The study uses panel data at the provincial level from 1990 to 2004. A simultaneous three-equation model of aggregate demand is estimated for vehicle kilometers traveled, vehicle stock and fuel efficiency. Price and income elasticities obtained are broadly consistent with those reported in the literature. Results show that an increase in the fuel price of 10% would reduce driving by about 2% in the long term and by 1% the average fuel consumption rate. Estimates of the short- and long-term rebound effects are approximately 8 and 20%, respectively. Findings also show 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. These findings indicate that the effectiveness of new fuel efficiency standards will be somewhat mitigated by the rebound effect. Since fuel price increases appear to have limited impacts on gasoline demand, major price changes would be necessary to induce significant reduction in the use of gasoline and even then income growth could erode gasoline savings associated with higher prices.

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  • Supplemental Notes:
    • This paper was presented at the Annual Meeting of the Transportation Research Board in January 2009.
  • Authors:
    • Barla, Philippe
    • Lamonde, Bernard
    • Miranda-Moreno, Luis F
    • Boucher, Nathalie
  • Publication Date: 2009-7


  • English

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  • Accession Number: 01141722
  • Record Type: Publication
  • Files: TRIS, ATRI
  • Created Date: Oct 17 2009 5:18PM