Rebound effect quote of the day
Posted by Evan Herrnstadt on April 21, 2008
As in, not mentioning the rebound effect. From an (gated, sorry) E&E News story about automakers calling for national CAFE standards:
The auto groups say the increase in corporate average fuel economy standards — to 35 miles per gallon by 2020 — mandated by last year’s energy bill would effectively reduce emissions. ‘Burning fuel produces carbon dioxide, so higher mileage for vehicles means lower emissions,’ said Dave McCurdy, president of the Alliance of Automobile Manufacturers.
As has been discussed in the economics world for a while now, driving a car that gets higher gas mileage makes driving less expensive on a per mile basis. As we know from that handy law of demand, when the price of a good drops, people demand more of it. Though the rebound effect would not eat away the entire benefit of a CAFE standard, it’s certainly worth a mention, and makes Mr. McCurdy’s point less cut-and-dry than he makes it out to be. A hypothetical increase from 20 to 40 MPG on average, for instance, will not cut automobile carbon emissions in half.
Paul Portney, Ian Parry, Howard Gruenspecht, and Winston Harrington wrote an RFF Discussion Paper on CAFE standards that was eventually published in the Journal of Economic Perspectives. Section 3.2 gives a brief survey of empirical estimates of the rebound effect. It suggests that the effect nullifies about 10-20% of the raw gas mileage improvement.