The Electric Vehicle Rebound Effect
AbstractElectric vehicles (EVs) are a promising technology for the decarbonisation of transportations. EVs are different from internal combustion engines (ICEs) in several ways, most notably they are cheaper to drive but more expensive to purchase, and may cause range anxiety.
Due to the lower cost per mile, a rebound effect may occur as households shift miles driven to the EV. Policies changing the relative cost per mile may also cause reshifting of VMT within the household fleet. Understanding the substitutability between EVs and ICEs within a fleet is therefore crucial as we move towards pricing policies that internalize externalities of gasoline consumption.
The aim of this paper is to look at how households adjust their total VMT and the allocation of VMT between vehicles in response to the purchase of an EV, as well as in response to changes in gasoline prices and electricity rates. These results will also help us estimate to what extent EVs can offset the use of existing ICE vehicles.
To answer these questions, we compile household level fleet data in Massachusetts to perform an event-study and difference-in-difference analysis, comparing miles driven after new vehicle purchases across EVs and ICEs. We distinguish between EVs purchased as additions to the fleet vs replacement vehicles, and use propensity score matching to find an appropriate control group.
We further estimate the elasticity of VMT to changes in gasoline prices for households with and without BEVs, using a fixed effect model and instrumenting for the price of gasoline with the price of crude oil in the international markets.
We find that EV households shift VMT to EVs when gasoline prices increase, although the increase in driving after the purchase of a new vehicle does not differ across fuel type, suggesting the absence of a rebound effect.