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

The Role of Modal Substitution in Rebound Effects Within US Freight Transportation

Energy efficiency improvements can create rebound effects that increase energy use. We have studied rebound in US freight transportation and found that substitution across transportation modes can be an important rebound mechanism. The sign of the rebound effect depends on whether the improved efficiency induces substitution with more or less fuel-efficient modes. We used detailed US microdata to model shippers’ freight mode choices and simulate how these choices change under energy efficiency standards. Under a policy approximating US heavy-duty truck fuel economy standards, we found that rebound can be positive or negative in individual market segments. However, the overall effect substantially reduces the gains from improved truck fuel efficiency. Energy savings are reduced by around 20% because shipments switch from rail service to the 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.