Can a Prius increase global warming?
Some argue that driving fuel-efficient cars will actually encourage people to drive more, boosting carbon emissions and hastening climate change. Here's why they're wrong.
Some argue that driving fuel-efficient cars will actually encourage people to drive more, boosting carbon emissions and hastening climate change. Here's why they're wrong.
I haven't read David Owen's new book聽but he appears to be taking Jevons too seriously. 聽 He needs to read Gary Becker's work on the value of time in a society where our value of time is rising. 聽 Here is the blurb for his book:
So, in plain English -- if you used to drive a Hummer and it achieves 10 MPG and you trade it in and buy a Prius and it achieves 100 MPG 聽--- your gasoline consumption and hence your GHG emissions will plummet if you continue to drive the same amount of miles each day.
But, demand curves slope down! 聽 To keep the math simple, assume the price of a gallon of gasoline is $2. 聽In this case, the total gasoline expenditure to drive one mile in a Hummer = 聽2/10 or 20 cents. 聽While, the total gasoline expenditure to drive one mile in a Prius = 2/100 = 2 cents. 聽 Suppose you respond to this 90% reduction in price by driving 11 times as many miles. 聽 I recognize that this would be a huge price elasticity but bear with me.
Suppose you used to drive the Hummer 10,000 miles per year so your gasoline consumption was 1000 gallons.
Given the assumptions above, when you substitute to the Prius, your gasoline consumption is now (1/100)*110,000 聽= 1,100 and that's the "proof" that Prius driving will cause climate change.
There is one obvious mistakes in Owen's logic:
Behavioral responses to price declines are not that large. 聽The reason for this is that we often need to use our own time when we use a product that consumes electricity. 聽 As Lucas Davis notes聽in this strong paper, 聽when we use an appliance such as a car or washing machine we use energy and our time. 聽Since our time is our scarcest asset, the "Becker Price" of using the device doesn't fall that much as technology becomes more efficient. 聽So, by ignoring our value of Time --- Owen is overstating the importance of the Rebound Effect.