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Limits on Car CO2 Emissions and the Rebound Effect

by nanne Sat Dec 22nd, 2007 at 06:10:46 PM EST

Peter Sain ley Berry is out to get my goat with his latest column in the EUobserver:

Making cars more efficient will not necessarily curb our emissions

Just the title is false. Making cars more efficient will curb our emissions. Not as a matter of logical necessity, but as a matter of empirical fact.

Sain ley Berry gets out the usual argument made in this context, known among economists as Jevons paradox and among greens as the rebound effect.

Moreover, the reason that vehicle emissions are increasing is not, surely, that people are buying bigger cars, but that they are buying more cars and driving them further. This may be because, relative to everything else, fuel prices have fallen in Europe since the 1950s, and the capital cost of vehicles has tumbled.

Improving car emission performance will reduce motoring costs even further. We may emit less carbon per kilometre, but overall there will be more cars and more kilometres. It does not necessarily follow that if emissions per kilometre fall, then total emissions will fall. This is particularly true if a big car is substituted by two smaller cars.


There is an extensive body of research on the increase of use that happens as a result of efficiency increases, especially with regard to Europe and the US. For driving cars the rebound effect is 10%, possibly lower, at the low end, and 30% at the high end. This means that 1 unit of energy efficiency increase will result in 0.9 to 0.7 units of reduction of consumption.

The opposing argument made by Sain ley Berry, that the only thing that will work is an increase in the cost of fuel, is exactly wrong. Driving (not the same as fuel consumption) is highly price-inelastic. An increase in fuel prices will mainly be useful to get people to change to fuel-efficient cars, not to get them to drive less. Unless you start talking about price increases of 100% and above. Now, I would like those. I would also like a pony.

In general, Peter Sain ley Berry discusses the measure to set mandatory CO2 limits for cars on its own merits (and gets most things wrong right there). The measure, however, is not taken in isolation. It is part of a comprehensive strategy to reduce carbon emissions and to increase resource efficiency throughout the European Union. It relates to a large set of different EU policies (for instance on emission levels for other forms of pollution), national policies (fuel taxes, road taxes) and local policies (congestion charges, or even simple parking fees) that directly regulate cars. The measure would still make sense in isolation. It makes even more sense in the actual context.

One of the most interesting results of the mandatory CO2 limits will be the technological changes they will spur. It is very difficult for high-end manufacturers to meet the limits without shifting to hybrid vehicles (reduced performance is a bad sell, I reckon). Hybrids can be a stepping stone towards all-electric vehicles (or fuel cell/electric hybrids for all I care) and thereby contribute to a carbon-neutral future.

Rebound effect and cars reading:
De Haan, P.; Mueller, M.G.; Peters, A. (2006): Does the hybrid Toyota Prius lead to rebound effects? Analysis of size and number of cars previously owned by Swiss Prius buyers. Ecological Economics 58 (3), pp. 592-605.
Grotton, F. (2001): Energy Efficiency and the Rebound Effect: Does Increasing Efficiency Decrease Demand?. CRS Report for Congress, National Library for the Environment (link).
Schipper, L. and M. Grubb (2000): On the rebound? Feedback between energy intensities and energy uses in IEA countries. Energy Policy 28 (6-7), pp. 367-388.

Some other thoughts:

The price-inelasticity of driving doesn't mean we can't do anything about it. Reducing driving requires different measures, like building a better public transportation infrastructure, improving land use planning and working on more livable cities (reducing traffic in cities is a big part of that, in turn). These can be paid for with a fuel tax. Or with any other tax.

Cars continue to be subsidised because the external costs of driving are not paid for. They are difficult to quantify. But they can be quite large, especially for the more polluting old diesels.

There was a recent report in Germany that rising driving costs and rising oil prices were 2 of the top 3 concerns Germans have for the next year. No politician is going to introduce further fuel taxes in this context.

If we're quite not at peak oil yet and oil prices go down again in the next few years, a drive for further fuel tax increases might become viable again.

Introducing fuel taxes on the EU level will remain impossible because all matters of environmental taxation have to be decided unanimously, also under Lisbon (though they inserted a passerelle clause, so there is a slight chance that this will change in the future).

by nanne (zwaerdenmaecker@gmail.com) on Sat Dec 22nd, 2007 at 06:53:05 PM EST
I think a key issue you highlight is the relationship between regulations and technology.

From Brad Plumer comes a graph of patent filings for sulfur dioxide-control technologies for electric power plants.

So it is with car design and manufacture. It is possible to get this kind of jump using fuel taxes, but the level of fuel taxes required is very high and certainly more economically (not to mention politically) damaging than just making a regulatory limit on new Car CO2 emissions.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Dec 23rd, 2007 at 12:01:26 PM EST
[ Parent ]
That's a pretty amazing graph. Thanks.
by nanne (zwaerdenmaecker@gmail.com) on Mon Dec 24th, 2007 at 05:00:41 AM EST
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This is also related to the "hardening of demand": If you squeeze the inefficiencies out of the system, then there are fewer opportunities to squeeze out inefficiencies when a crisis occurs. In my view, this is the situation that Europe is in right now: There's plenty of enthusiasm for green power, green transportation, local food sources, etc., but little margin for absorbing a short-term shortage. We in the U.S. may have a slight tactical advantage because of our inefficiency, which will allow us to absorb short-term shortages more easily.

In any case, there needs to be a very significant reduction in the world's population, and it's going to come, sooner or later. However, discussion of the topic is not politically correct.

by asdf on Sun Dec 23rd, 2007 at 11:22:52 AM EST
The opposing argument made by Sain ley Berry, that the only thing that will work is an increase in the cost of fuel, is exactly wrong. Driving (not the same as fuel consumption) is highly price-inelastic. An increase in fuel prices will mainly be useful to get people to change to fuel-efficient cars, not to get them to drive less. Unless you start talking about price increases of 100% and above. Now, I would like those. I would also like a pony.

... is that a direct excise on new car prices that is keyed to fuel efficiency will have the same main impact as an increase in fuel price ... and do it out of the pockets of the higher-income people of the community who typically buy new cars ... while down the track increasing the supply of more fuel efficient car available to the lower-income people in the community who typically buy used cars.

Set the fuel waste excise at "X"% with a three-tier schedule ... that is, double the excise ... 2X% ... for cars that are twice the fuel inefficiency of the current fleet, and a 0% fuel inefficiency excise excise on cars that half or less of the fuel inefficiency of the current fleet.

The receipts go straight into a pool of funds for local communities to invest in energy-saving transport infrastructure.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Dec 23rd, 2007 at 11:54:40 AM EST
Yes. Direct excises on new cars weighed by emissions are a good policy.

Coming to the technicalities of your measure, very few cars have double the fuel efficiency of the fleet and very few have half. So you'd want more tiers in the schedule. Something like 8 should do.

Taking CO2 emissions, the Porsche Cayenne entry model, for instance, has 310 grammes of CO2 emissions per kilometre, which is less than double the emissions of the EU average (about 160). There are no new cars that emit 80 grammes. The most efficient new car now, the Toyota Aygo/Peugot 107/Citroen C1 model, emits 109 grammes.

80 should be possible if you make those hybrids; the Honda Insight emitted 80 grammes according to Honda (probably a bit optimistic, but it was a larger car).

by nanne (zwaerdenmaecker@gmail.com) on Mon Dec 24th, 2007 at 05:48:37 AM EST
[ Parent ]
Or you could simply divide the base excise by the mileage - that would give pretty much the same effect.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Dec 25th, 2007 at 05:20:40 PM EST
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