The Rebound Effect for Car Transport

Enforcing fuel efficiency standards for new cars are one of the most widespread policies used to reduce the transport sector's energy consumption and the associated negative external effects. The direct rebound effect reduces the net benefits of fuel efficiency improvements. Better fuel efficiency reduces the per kilometer cost of car use, raising the demand for driving, so that some of the energy savings that would have been realized with unchanged behavior are foregone. The effectiveness of fuel efficiency policies is critically depends on the magnitude of the rebound effect. Empirical estimates for the rebound effect differ substantially between studies, depending on the country, on the underlying assumptions made, on the type of data used, and on the econometric techniques applied. The most reliable empirical estimates suggest an average rebound effect of some 10%–20%.