Assessing the rebound effect using a natural experiment setting: Evidence from the private transportation sector in Israel

• Published in: Energy policy 2016-06, Vol.93, p.41-49
• Main Authors: Steren, Aviv, Rubin, Ofir D., Rosenzweig, Stav
• Format: Article
• Language: English
• Subjects: Automobiles; Econometrics; Efficiency; Energy consumption; Energy efficiency; Energy policy; Environmental organizations; Estimation; Fuel pricing policy; Government subsidies; Households; Identification; Low emission vehicles; Rebound effect; Residential energy; Studies; Technology subsidy; Transportation; Transportation industry; Transportation policy
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2016.02.038

Subsidizing energy-efficient technologies is considered by energy and environmental organizations to be one of the most effective policies for decreasing energy consumption. In the transportation sector such policies are becoming ever more popular, and have been implemented in a considerable number of countries in recent years. Because these policies promote energy-efficient cars with lower usage costs, they may rebound and increase the distances traveled by households that have switched to energy-efficient cars. From an econometric perspective, a subsidization policy can be used as a valid instrument to identify the households’ choice of energy efficiency levels of the cars they own. This identification, in turn, can be utilized to account for endogeneity in the estimation of a rebound effect. The present study uses a natural experiment setting of such a policy implemented in Israel in 2009. The empirical results indicate a fairly large average rebound effect of 40%. The results also indicate that while the policy indeed encouraged the purchase of energy-efficient cars, households that bought a new or used car during the surveyed period did not generate a rebound effect of a different magnitude compared with other households that did not. We discuss the implications of our findings. •Subsidizing energy-efficient cars has become a popular policy in many countries.•We are unaware of studies identifying rebound via cars’ subsidization policy.•We explored a rebound in light of such a policy in Israel.•Household expenditure survey data, fuel prices and car characteristics were employed.•We found an average rebound effect of 40%.