“Negative Rebound: Fuel Economy Standards and Miles Traveled”
Mark Jacobsen (University of California, San Diego)
Joint with Yanjun (Penny) Liao (University of California, San Diego)
We examine the theory of gasoline rebound in a setting where depreciation of capital enters the household decision problem. The higher capital costs associated with energy-saving technology contribute a negative term to net rebound, reducing it below the elasticity of demand for miles with respect to fuel cost savings. We also show how income effects and vehicle attribute effects can further reduce rebound, making negative net rebound (a reduction in miles driven in the presence of fuel economy standards) possible or even likely.
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