Association for Public Policy Analysis & Management

Economic theory suggests that these fuel economy standards induce a rebound effect, which is the increase in energy use caused by lower per-mile fuel costs from the regulation. Despite a large literature on this effect for passenger vehicles, few studies attempt to estimate the rebound effect for heavy-duty trucks. In this study we account for both demand and supply influences on truck numbers and use, drawing on a pooled cross section of detailed truck-level microdata that spans 25 years. We address two effects that both have important implications for the eventual societal benefits of these standards. First, we estimate the magnitude of the rebound effect for both vocational vehicles and tractor-trailers. Second, we estimate the effect of economic activity on miles driven for medium- and heavy-duty vehicles.

On aggregate, our estimates imply an average rebound effect of 30 percent for tractor trailers and 10 percent for vocational vehicles. Decomposing the effect into per-truck miles traveled and truck counts, nearly all of the rebound effect is realized through changes in per-truck miles traveled. We compare these long-run estimates with those in the short run, where we find significant evidence of substitution from less efficient tractor-trailers to more efficient tractor-trailers. We find no evidence of substitution within the heterogeneous vocational class of trucks. Using a two- and ten-year simulation, we show that substitution in the short run can alter the rebound effect and have important implications for the fuel economy standards.

We also precisely estimate an aggregate truck miles elasticity with respect to gross state product that is less than 1:  60 percent for tractor-trailers and 82 percent for vocational vehicles. For both classes of trucks, we find that the majority of this effect operates through more trucks entering the market. This could imply that most trucks are already operating at capacity in terms of miles driven and cargo hauled.

Our estimates for the rebound effect and effect of economic activity have important implications for fuel economy standards. Our estimate of the rebound effect for tractor-trailers is roughly six times higher than the agency assumption of 5%. While their estimate for vocational vehicles appears to be correct, the discrepancy for tractor-trailers is particularly important, as tractor-trailers make up roughly two-thirds of total truck fuel consumption. Second, we find strong evidence that the one-to-one relationship between economic activity and miles traveled assumed by the agencies is incorrect. For tractor-trailers and, to a lesser extent, vocational vehicles, we estimate this relationship to be less than one, implying the agencies overestimate aggregate trucking activity in the future. The estimates taken together suggest that the agencies regulating US trucks likely overestimate projected long-run fuel savings and greenhouse gas emissions reductions resulting from the standards.