Estimating fuel demand elasticities to evaluate CO2 emissions: Panel data evidence for the Lisbon Metropolitan Area

This paper estimates fuel demand models for the Lisbon Metropolitan Area (AML) and uses the demand elasticities obtained to predict future levels of road transport CO₂ greenhouse gas emissions. Data for the municipalities constituting the AML and the period 1993–2010 are analysed using static and dynamic panel data models to measure the relative importance of fuel price, income, vehicle stock, the price of public transport, and the availability of urban and suburban rail networks on fuel demand. To the best of our knowledge, this is the first study in the Portuguese context to produce fuel demand elasticities for a specific metropolitan area, as opposed to the estimation of country-level aggregate elasticities. Our findings indicate that the elasticity of fuel demand with respect to fuel price ranges between −0.48 and −0.72 in the short run and between −1.19 and −1.82 in the long run. Income elasticities are found to range between 0.51 and 0.54 in the short run and between 1.26 and 1.37 in the long run. The elasticity of fuel demand with respect to vehicle stock (keeping population constant) is 0.57 in the short run and 1.43 in the long run. There is only weak evidence of a reduction in fuel demand as a result of a decrease in the price of public transport, and no effect of greater availability of rail networks. Based on the elasticities estimated, we predict road transport CO₂ emissions for the AML according to different macroeconomic scenarios. The results indicate that the emissions target is only achieved in the scenario of poor economic performance. In the presence of medium and strong economic growth, fuel prices would need to increase by about 7% and 11% per year respectively in order to meet the emissions target.     

Fuel price elasticities for single-unit truck operations in the United States

This paper provides fuel price elasticity estimates for single-unit truck activity, where single-unit trucks are defined as vehicles on a single frame with either (1) at least two axles and six tires; or (2) a gross vehicle weight greater than 10,000 lb. Using data from 1980 to 2012, this paper applies first-difference and error correction models and finds that single-unit truck activity is sensitive to certain macroeconomic and infrastructure factors (gross domestic product, lane miles expansion, and housing construction), but is not sensitive to diesel fuel prices. These results suggest that fuel price elasticities of single unit truck activity are inelastic. These results may be used by policymakers in considering policies that have a direct impact on fuel prices, or policies whose effects may be equivalent to fuel price adjustments.     

Elasticities of fuel and traffic demand and the direct rebound effects: An econometric estimation in the case of Norway

We estimate the elasticities of fuel and travel demand with respect to fuel prices and income in the case of Norway. Furthermore, we derive the direct rebound effects that explain the degree to which a fuel price increase is “offset” in the form of greater fuel use and/or travel due to improvements in vehicle fuel efficiency. For this purpose, we use and compare two alternative econometric approaches: the error correction model (ECM) and the dynamic model. Our initial assumption is that one should not be indifferent with respect to the approach used to derive elasticities. The data used are for the period 1980–2011. Our results indicate the following: (1) the dynamic model fits the data better than the ECM model does; (2) the estimated elasticities of fuel demand with respect to price and income are −0.26 and 0.06 in the short run and −0.36 and 0.09 in the long run. For travel demand, the respective elasticities are −0.11 and 0.06 in the short run and −0.24 and 0.13 in the long run, implying inelastic demands for fuel and travel demand; and (3) rebound effects indicate that 0.26% and 0.06% of fuel savings as a result of fuel price increase will be offset in the form of more fuel use in the short run and in the long run, respectively, if fuel efficiency increases by 1%. Our policy recommendations are that policies should not be indifferent to the methods used to derive elasticities. We contend that it is crucial to seriously consider rebound effects in policy making because basic elasticity estimates exaggerate the impact of fuel price increases.     

Empirical estimation of price and income elasticities of air cargo demand: The case of Hong Kong

This paper estimates the price and income elasticities of air cargo demand and examines how they may change after the 2008 financial crisis. Using a set of time series data, we simultaneously estimate the aggregated demand and supply functions of air cargo at Hong Kong International Airport (HKIA). We find that during the entire sampling period of 2001–2013, the price elasticity for air cargo transport demand at HKIA ranges from −0.74 to −0.29, suggesting that air cargo demand in Hong Kong reacts negatively to price (as expected) but does not appear to be very sensitive to price. The income elasticity ranges from 0.29 to 1.47 and appears sensitive to seasonality adjustment approaches. However, in terms of the speed of changes, air cargo demand changes much faster than overall economy, indicating the presence of a pro-cyclical pattern of air cargo traffic with respect to the overall economy. Our analysis shows that air cargo demand becomes more sensitive to changes in both price and income after 2008.     

Low carbon urban transport scenarios for China and India: A comparative assessment

This paper assesses comparable urban transport scenarios for China and India. The assessment methodology uses AIM/End-use model with a detailed characterization of technologies to analyze two scenarios for India and China till the year 2050. The first scenario assumes continuation and enhancement, in both countries, of policies under a typical business-as-usual dynamics, like constructing metros, implementing national fuel economy standards, promoting alternate fuel vehicles and implementing national air quality standards. The alternative, low carbon scenario assumes application, in both countries, of globally envisaged measures like fuel economy standards as well as imposition of carbon price derived from a global integrated assessment modeling exercise aiming to achieve global 2 °C temperature stabilization target. The modeling results for both countries show that decarbonizing transport sector shall need a wide array of measures including fuel economy, low carbon fuel mix including low carbon electricity supply. The comparison of China and India results provides important insights and lessons from their similarities and differences in the choice of urban transport options. India can benefit from China’s experiences as it lags China in urbanization and income. Modeling assessments show that both nations can contribute to, as well as benefit by aligning their transport plans with global climate stabilization regime.     

The asymmetric effects of income and fuel price on air transport demand

Forecasts of passenger demand are an important parameter for aviation planners. Air transport demand models typically assume a perfectly reversible impact of the demand drivers. However, there are reasons to believe that the impacts of some of the demand drivers such as fuel price or income on air transport demand may not be perfectly reversible. Two types of imperfect reversibility, namely asymmetry and hysteresis, are possible. Asymmetry refers to the differences in the demand impacts of a rising price or income from that of a falling price or income. Hysteresis refers to the dependence of the impacts of changing price or income on previous history, especially on previous maximum price or income. We use US time series data and decompose each of fuel price and income into three component series to develop an econometric model for air transport demand that is capable of capturing the potential imperfectly reversible relationships and test for the presence or absence of reversibility. We find statistical evidence of asymmetry and hysteresis – for both, prices and income – in air transport demand. Implications for policy and practice are then discussed.     

Regional climate impact of aerosols emitted by transportation modes and potential effects of policies on demand and emissions

The transportation system is one of the main sectors with significant climate impact. In the U.S. it is the second main emitter of carbon dioxide. Its impact in terms of emission of carbon dioxide is well recognized. But a number of aerosol species have a non-negligible impact. The radiative forcing due to these species needs to be quantified. A radiative transfer code is used. Remote sensing data is retrieved to characterize different regions. The radiative forcing efficiency for black carbon are 396 ± 200 W/m²/AOD for the ground mode and 531 ± 190 W/m²/AOD for the air transportation, under clear sky conditions. The radiative forcing due to contrail is 0.14 ± 0.06 W/m² per percent coverage. Based on the forcing from the different species emitted by each mode of transportation, policies may be envisioned. These policies may affect demand and emissions of different modes of transportation. Demand and fleet models are used to quantify these interdependencies. Depending on the fuel price of each mode, mode shifts and overall demand reduction occur, and more fuel efficient vehicles are introduced in the fleet at a faster rate. With the introduction of more fuel efficient vehicles, the effect of fuel price on demand is attenuated. An increase in fuel price of 50 cents per gallon, scaled based on the radiative forcing of each mode, results in up to 5% reduction in emissions and 6% reduction in radiative forcing. With technologies, significant reduction in climate impact may be achieved.     

Impact of fuel price on vehicle miles traveled (VMT): do the poor respond in the same way as the rich?

The effects of fuel price on travel demand for different income groups reveal the choices and constraints they are faced with. The first purpose of this study is to understand these underlying choices and constraints by examining the variation of fuel price elasticity of vehicle miles travelled (VMT) across income groups. On the other hand, the rebound effect—increase in VMT as a result of improvement in fuel efficiency may offset the negative effect of fuel price on VMT. The second purpose of this study is to compare the relative magnitudes of the fuel price elasticity of VMT and the rebound effect. A system of structural equations with VMT and fuel efficiency (MPG, miles per gallon) as endogenous variables is estimated for households at different income levels from 2009 National Household Travel Survey. Higher income households show greater fuel price elasticity than lower income households. Fuel price elasticities are found to be ?0.41 and ?0.35 for the two highest income groups, while an elasticity of ?0.24 for the lowest income group is identified. The rebound effect is found to be only significant for the lowest income households as 0.7. These findings suggest the potential ability of using fuel price as a tool to affect VMT. The study results also suggest possible negative consequences faced by lower income households given an increase in fuel price and call for more studies in this area.     

Estimating flight-level price elasticities using online airline data: A first step toward integrating pricing,demand, and revenue optimization

We estimate flight-level price elasticities using a database of online prices and seat map displays. In contrast to market-level and route-level elasticities reported in the literature, flight-level elasticities can forecast responses in demand due to day-to-day price fluctuations. Knowing how elasticities vary by flight and booking characteristics and in response to competitors’ pricing actions allows airlines to design better promotions. It also allows policy makers the ability to evaluate the impacts of proposed tax increases or time-of-day congestion pricing policies. Our elasticity results show how airlines can design optimal promotions by considering not only which departure dates should be targeted, but also which days of the week customers should be allowed to purchase. Additionally, we show how elasticities can be used by carriers to strategically match a subset of their competitors’ sale fares. Methodologically, we use an approach that corrects for price endogeneity; failure to do so results in biased estimates and incorrect pricing recommendations. Using an instrumental variable approach to address this problem we find a set of valid instruments that can be used in future studies of air travel demand. We conclude by describing how our approach contributes to the literature, by offering an approach to estimate flight-level demand elasticities that the research community needs as an input to more advanced optimization models that integrate demand forecasting, price optimization, and revenue optimization models.     

A multivariate cointegrating vector auto regressive model of freight transport demand: evidence from Indian railways

In this paper long run structural relationship for freight transport demand is derived for railways in India using annual time series data for 1960–1995. Some of the recent developments in multivariate dynamic econometric time series modelling have been employed such as estimation of long-run structural cointegrating relationship, short-run dynamics and measurement of the effects of shocks and their persistence during the evolution of dynamic freight transport demand system. The models are estimated using a cointegrating vector autoregressive (VAR) modelling framework, which allows for endogeneity of regressors. Results indicate high GDP elasticity and low price elasticity, with real freight rate, i.e. the price variable behaving exogenously with respect to the system. Any disequilibrium in the short-run is likely to be corrected in the long run via adjustments in freight transport demand and GDP. Further, the demand system seems to be stable in the long run and converges to equilibrium in a period of around 3 years after a typical system-wide shock.     

Structure and dynamics of non-suburban passenger travel demand in Indian railways

In this paper we derive long run structural relationships for all the three classes, viz. upper, second and ordinary second class, of non-suburban long distance passenger transport demand for Indian railways using annual time series data for 1970–1995. We employ some of the recent developments in multivariate dynamic econometric time series modeling including estimation of long-run structural cointegrating relationships, short-run dynamics and measurement of the effects of shocks and their persistence on evolution of the dynamic passenger transport demand system. The models are estimated using a cointegrating vector autoregressive (VAR) modeling framework, which allows for endogeneity of regressors. The demand systems are found to be stable for all the classes in the long run and they converge to equilibrium in a period of around 2–4 years after a typical system-wide shock. Any disequilibrium in the short-run is corrected in the long-run with adjustments in passenger transport demand and the price variable, i.e. real rate charged per passenger kilometer. Results show that travel demand in all classes would rise with income, although the rise is less than proportionate in the case of ordinary class. High price elasticity in long-run and short-run impulse responses indicate that passenger fare hike could lead to substantial decline in travel demand leading to decline in revenue earnings of the railways. This revised version was published online in June 2006 with corrections to the Cover Date.     

Vehicle attribute trade-offs to meet the 2025 CAFE fuel economy target

The literature analyzes changes in vehicle attributes that can improve fuel economy to meet Corporate Average Fuel Economy (CAFE) standards. However, these analyses exclude either vehicle price, size, acceleration or technology advancement. A more comprehensive examination of the trade-offs among these attributes is needed, this case study focuses on technically feasible modifications to a reference 2012 vehicle to meet the 2025 fuel economy target. Scenarios developed to examine uncertainty in technology advancement indicate that expected technology cost reductions over time will be insufficient to offset the costs of additional fuel efficiency technologies that could be used to meet the 2025 fuel economy target while maintaining other vehicle attributes. The mid-price scenario results show the targeted 66% increase in fuel economy from 2012 to 2025 can be achieved with (i) a 10% ($2070) vehicle price increase (lightweight hybrid electric vehicle), (ii) a 31% (2.9 second) increase in the 0–97 km/h (60 mph) acceleration time (smaller engine), or (iii) a 17% (700 L) decrease in interior volume (smaller body) while maintaining other vehicle attributes. These results are consistent with those obtained using methods that generalize the US light-duty vehicle fleet, but are not a forecast of future vehicle attributes because combinations of less perceptible changes to vehicle price, acceleration and size would also be feasible. This study shows there are numerous ways that 2025 fuel economy targets can be met; therefore, the trade-offs quantified provide important insights on the implications of future CAFE standards.     

Quantifying drivers’ acceptance of renewable fuel standard: Results from a choice experiment in South Korea

The production and use of renewable fuels in the transport sector are rapidly increasing. Renewable fuel standard (RFS) is a strong regulatory component and quantitative policy expected to have a significant market impact. In Korea, RFS implementation was agreed upon in July 2013 and will be enforced beginning in July 2015. Drivers’ acceptance is the most important consideration for RFS introduction and sustainable implementation. This study analyzed Korean customer preferences for RFS and quantified their acceptance level according to policy design. A choice experiment was analyzed with a mixed logit model to reflect the heterogeneity of respondents’ preferences. Respondents were relatively sensitive to the price increase, while other attributes had little effect on acceptance of RFS. Differences between the influences of attributes on drivers’ acceptance should be considered when designing RFS implementation. Furthermore, it is recommended that the price of transportation fuels should be limited to an increase between KRW 10 and 20/liter (USD 8.879 × 10⁻³ and 1.776 × 10⁻²/liter) to ensure high acceptance level, secure a budget for infrastructure, and achieve substantial environmental improvement.     

Meta-analysis of public transport demand

The present study uses meta-regression in order to explain the wide variation in elasticity estimates obtained in previous demand studies, and provide summaries of several bus demand elasticities.One important finding as to the price elasticity is that the often cited rule of thumb of −0.3 holds good if quality of service represented by vehicle-kilometres is treated as an exogenous variable, but not when it is treated as endogenous.Based on the results it is recommended that demand models should include car ownership, price of petrol, own price, income and some measure of service among the explanatory variables and that the service variable should be treated as endogenous.In previous meta-studies in this field focus has been on own price elasticity only while this study also includes elasticities with respect to, level of service, income, price of petrol and car ownership. The short run for the US are found to be −0.59, 1.05, −0.62, 0.4 and −1.48 respectively.     

Does the income elasticity of road traffic depend on the source of income?

An extensive body of literature addresses the income elasticity of road traffic, in which income is typically treated as a homogenous quantity. Here we report evidence of heterogeneity in cross-sectional estimates of the elasticity of vehicle-kilometres of travel (VKT) with respect to income, when household income is disaggregated on the basis of income source.The results are generally intuitive, and show that the cross-sectional income elasticity of road traffic is not homogeneous as is typically specified in transport planning models. We show that in a number of circumstances the cross-sectional elasticity with respect to aggregate household income is of the opposite sign in comparison to more refined estimates of elasticity disaggregated by income source. If further research confirms that the elasticities we report here are causal in nature, neglecting the elemental effects could result in misleading results affecting practical infrastructure-investment and policy decisions, particularly as the mix of income sources shifts (e.g. if, as society ages, pension income increases as a share of all income).These results are of interest to both researchers and forecasters of travel demand, as well as designers of future travel survey instruments; the latter group must decide how to generate data about respondents’ income. Current expert guidance is to collect a single estimate of aggregate income at the household level. Future travel survey design choices will bound the analyses that can be supported by the resulting survey data, and therefore methodological research to re-visit the trade-offs associated with such choices is warranted.     

Imperfect reversibility of air transport demand: Effects of air fare,fuel prices and price transmission

There are recent evidence that air transport demand may not have a perfectly reversible relationship with income and jet fuel prices, as is assumed in most demand models. However, it is not known if the imperfectly reversible effects of jet fuel price are a result of asymmetries in the supply side, i.e., asymmetries in cost pass through from fuel prices to air fare, or of demand side behavioral asymmetries whereby people value gains and losses differently. This paper uses US time series data and decomposes air fare and fuel price into three component series to develop an econometric model of air transport demand that is capable of capturing the potential imperfectly reversible relationships and test for the presence or absence of reversibility. We find that air transport demand shows asymmetry with respect to air fare, indicating potential imperfect reversibility in consumer behavior. We also find evidence of asymmetry and hysteresis in cost pass-through from jet fuel prices to air fare, showing rapid increases in airfare when fuel prices increases but a slower response in the opposite direction.     

Traveled distance,stock and fuel efficiency of private vehicles in Canada: price elasticities and rebound effect

This paper presents estimates of the rebound effect and other elasticities for the Canadian light-duty vehicle fleet using panel data at the provincial level from 1990 to 2004. We estimate a simultaneous three-equation model of aggregate demand for vehicle kilometers traveled, vehicle stock and fuel efficiency. Price and income elasticities obtained are broadly consistent with those reported in the literature. Among other results, an increase in the fuel price of 10% would reduce driving by ~2% in the long term and by 1% the average fuel consumption rate. Estimates of the short- and long-term rebound effects are ~8 and 20%, respectively. We also find that an increase in the gross domestic product per capita of 10% would cause an increase in driving distance of 2–3% and an increase of up to 4% in vehicle stock per adult. In terms of policy implications, our results suggest that: (1) the effectiveness of new fuel efficiency standards will be somewhat mitigated by the rebound effect and (2) fuel price increases have limited impacts on gasoline demand.

Eco-driving key factors that influence fuel consumption in heavy-truck fleets: A Colombian case

This research identifies key variables that influence fuel consumption that might be improved through eco-driving training programs under three circumstances that have been scarcely studied before: (a) heavy- and medium-duty truck fleets, (b) long-distance freight transport, and (c) the Latin American region. Based on statistical analyses that include multivariate regression of operational variables on fuel consumption, the impacts of an eco-driving training campaign were measured by comparing ex ante and ex post data. Operational variables are grouped into driving errors, trip conditions, driver behavior, driver profile, and vehicle attributes.The methodology is applied in a freight fleet with nationwide transport operations located in Colombia, where the steepness of its roads plays an important role in fuel consumption. The fleet, composed of 18 trucks, is equipped with state-of-the-art real-time data logger systems. During four months, 517 trips traveling a total distance of 292,512 km and carrying a total of 10,034 tons were analyzed.The results show a baseline average fuel consumption (FC) of 1.716 liters per ton-100 km. A different logistics performance indicator, which measures FC in liters per ton transported each 100 km, shows an average of 3.115. After the eco-driving campaign, reductions of 6.8% and 5.5% were obtained. Drivers’ experience, driving errors, average speed, and weight-capacity ratio, among others, were found to be highly relevant to FC. In particular, driving errors such as acceleration, braking and speed excesses are the most sensitive to eco-driving training, showing reductions of up to 96% on the average number of events per trip.     

Fast computing and approximate fuel consumption modeling for Internal Combustion Engine passenger cars

This article presents a fuel consumption model, SEFUM (Semi Empirical Fuel Use Modeling), and its comparison with three models from the literature on a 600 km experimental database. This model is easy to calibrate with only a few required parameters that are provided by car manufacturers. The test database has been built from 21 drivers who drove in two conditions (normal and ecodriving) on a 15 km trip. For the model evaluation, three indicators have been selected: instantaneous fuel use root mean square error, cumulated error and computation time in order to evaluate the accuracy both in cumulated and instantaneous fuel use and to estimate computation time of each model. Results tend to prove that the model is able to compute rapidly (maximum of 1500 simulated kilometers under Matlab) in comparison to all other models while ensuring a high accuracy and precision for cumulated and instantaneous fuel use.     

Auto travel fuel elasticity in a rapidly developing urban area

This paper presents results of a study conducted to quantify the effect of fuel cost increases on household auto travel in Riyadh, the rapidly developing capital of Saudi Arabia. Responses of a stratified random sample of 1648 individual households provided the data base for the analysis. The auto trip measures of shrinkage ratio, arc and log-arc elasticities were calculated for households categorized by income and family size. The elasticity measures suggested the existence of significant relationship among the factors of fuel cost, the number of daily auto trips, and family size. It was found that as fuel prices increased, the number of daily trips decreased, and that this decrease in daily trips was greater with larger family size. A step-wise multiple regression analysis with three independent variables of car ownership, family size, and daily fuel expenditures was developed. The model was fairly accurate in predicting variations in daily household travel. The regression parameter of the variable fuel cost was also used to derive demand elasticity to fuel expenditures. Elasticity measures ranged between -0.30 and -0.37.