Within-day variation in the rebound effect from fuel efficiency standards and implications for road congestion

Abstract

Travel demand and congestion fluctuate throughout the day, but temporal heterogeneity in travel demand elasticities is often overlooked. I estimate within-day variation in the fuel economy elasticity of travel demand, illustrating the timing of the rebound effect — when higher fuel efficiency standards increase mileage by decreasing per-mile costs. Using multiple empirical strategies and data sets, I find that drivers are most elastic during peak demand periods that coincide with morning and evening commuting hours. Mode switching for shorter commute trips in areas with low-cost alternatives appears to drive much of the within-day heterogeneity. Further, accounting for temporal heterogeneity in the rebound effect has the potential to determine whether the congestion costs of a fuel economy improvement exceed the pollution benefits.