Changing Vehicle Travel Price Sensitivities The Rebounding Rebound Effect

There is growing interest in transportation pricing reforms to help achieve various planning objectives such as congestion, accident and emission reductions. Their effectiveness is affected by the price sensitivity of transport, that is, the degree that prices affect travel activity, measured as elasticities (percentage change in travel caused by a one-percent price change). Lower elasticities imply that price reforms are relatively ineffective at achieving planning objectives, price increases significantly harm consumers, and rebound effects (additional vehicle travel caused by increased fuel economy) are small so strategies that increase vehicle fuel economy are effective at conserving fuel. Higher elasticities imply that price reforms are relatively effective at achieving planning objectives, consumers can easily reduce their travel, and rebound effects are large. Some studies found very low transport elasticities during the last quarter of the Twentieth Century but recent evidence suggests that price sensitivities have since increased. This report discusses the concepts of price elasticities and rebound effects, reviews vehicle travel and fuel price elasticity estimates, examines evidence of changing price sensitivities, and discusses policy implications. Summarized in, “Changing North American Vehicle-Travel Price Sensitivities: Implications For Transport and Energy Policy,” Transport Policy, July 2012 (http://dx.doi.org/10.1016/j.tranpol.2012.06.010) Changing Vehicle Travel Price Sensitivities Victoria Transport Policy Institute