Suggested Citation:
Bushnell, James and Jonathan E. Hughes (2024)

Fuel Efficiency, Mode Choice and the Rebound Effect in U.S. Freight Transportation

Energy efficiency improvements can create rebound effects that increase energy use. We study rebound in U.S. freight transportation and show substitution across transportation modes can be an important rebound channel. The sign of the rebound effect depends on whether improved efficiency induces substitution to more or less fuel-efficient modes. We use detailed U.S. micro data to model shippers’ freight mode choices and simulate how these choices change under energy efficiency standards. Under a policy approximating U.S. heavy duty truck fuel economy standards, we find rebound can be positive or negative in individual market segments. However, the overall effect substantially reduces gains from improved truck fuel efficiency. Energy savings are reduced by approximately 19% because shipments switch from rail service to improved, but still less fuel-efficient, truck service. Similar substitution rebound effects could occur in other settings where producers choose between technologies with different energy efficiencies.