Publication Detail
On the Road Again: A Study of Automobile Travel Demand, Fuel Economy, and Environmental Regulation
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UCD-ITS-RR-94-25 Research Report Alumni Theses and Dissertations |
Suggested Citation:
Espey, Molly (1994) On the Road Again: A Study of Automobile Travel Demand, Fuel Economy, and Environmental Regulation. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-94-25
The principle objective of this study is to analyze the demand for automobile fuel to determine the sensitivity of fuel demand to fuel price and income changes through the use of a new international data set. In the short run, consumers are able to respond to fuel price or income changes by changing the amount they drive. In the long run, consumers can respond by changing their demand for automobiles and changing the type of automobile owned, including average fuel economy. This study includes a model of both automobile travel demand and fuel economy, estimates of the price and income elasticity of automobile fuel demand, and an analysis of the impact of fuel taxes and fuel economy standards on tailpipe emissions.
Automobile travel demand is modelled using a quadratic logarithmic model with the assumption of full cross-sectional correlated and time-wise auto-regression. Fuel economy is estimated using nonlinear maximum likelihood. The model of fuel economy includes fuel prices, income, technological change, and government taxation as explanatory variables.
Both automobile travel demand and fuel economy are found to be price and income inelastic. The price elasticity is estimated to be relatively constant across developed countries while the income elasticity of automobile travel demand is estimated to decrease as income increases. It is estimated that most of the difference in the average level of fuel economy between the United States and European countries is due to differences in fuel prices and vehicle taxation, and the consumers' choice of fuel efficiency is found to be less sensitive to fuel price and income changes than previously believed.
Energy conservation regulations, such as fuel taxes and average fuel economy mandates for automobiles, are often assumed to reduce air pollution in lock step with the reduction in fuel consumption. This study uses a simple graphical analysis to examine the relative impact of fuel taxes and fuel economy standards on pollution levels given the current tailpipe emissions standards and an alternative emissions standard.
Automobile travel demand is modelled using a quadratic logarithmic model with the assumption of full cross-sectional correlated and time-wise auto-regression. Fuel economy is estimated using nonlinear maximum likelihood. The model of fuel economy includes fuel prices, income, technological change, and government taxation as explanatory variables.
Both automobile travel demand and fuel economy are found to be price and income inelastic. The price elasticity is estimated to be relatively constant across developed countries while the income elasticity of automobile travel demand is estimated to decrease as income increases. It is estimated that most of the difference in the average level of fuel economy between the United States and European countries is due to differences in fuel prices and vehicle taxation, and the consumers' choice of fuel efficiency is found to be less sensitive to fuel price and income changes than previously believed.
Energy conservation regulations, such as fuel taxes and average fuel economy mandates for automobiles, are often assumed to reduce air pollution in lock step with the reduction in fuel consumption. This study uses a simple graphical analysis to examine the relative impact of fuel taxes and fuel economy standards on pollution levels given the current tailpipe emissions standards and an alternative emissions standard.
Ph.D. Dissertation.