Truck Energy Efficiency Standards.

• Author: Van Doren, Peter
• Position: Working Papers: A SUMMARY OF RECENT PAPERS THAT MAY BE OF INTEREST TO REGULATION'S READERS.

Truck Energy Efficiency Standards

* "Mode Choice, Energy, Emissions and the Rebound Effect in U.S. Freight Transportation," by James B. Bushnell and Jonathan E. Hughes. October 2020. SSRN #3689848.

Energy efficiency regulations are more popular with voters than Pigouvian taxes on energy use because the costs of the former are much less visible than the latter. But a perverse effect of energy efficiency regulations is that they decrease the price of energy use slightly because of the increased efficiency, resulting in slightly more energy use that offsets some of the efficiency gains. This increased use of energy is called the "rebound" effect. In contrast, higher energy prices from taxation discourage more use even if efficiency improvements occur.

In August 2016, the U.S Environmental Protection Agency released new efficiency standards for heavy-duty trucks (think tractor-trailer trucks, though this class includes very large pickups) produced through the 2027 model year. The EPA predicts the new standards will improve new truck tractor fuel efficiency 11%-14% by 2021 and 19%-25% by 2027.

Trucks are not the only method of shipping freight. Truck shipments are approximately 46% of total ton-miles while rail accounts for approximately 48% of ton-miles. Rail is slower but much more fuel efficient. Rail can move 1 ton of freight approximately 450 miles on a gallon of fuel while trucks move approximately 70 ton-miles per gallon.

Intuitively, if truck fuel economy improves, marginal shippers who previously paid lower rail rates but higher inventory costs (because they stored more stuff in inventory...