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| Author: | Bonilla, D. Foxon, T. |
| Title: | Demand for new car fuel economy in the UK, 1970-2005 |
| Journal: | Journal of Transport Economics and Policy
2009 : JAN, VOL. 43:1, p. 55-83 |
| Index terms: | United Kingdom fuel transport economics cars sustainable development elasticity of demand |
| Language: | eng |
| Abstract: | In the past thirty years, governments have sought to encourage improvements in new car fuel economy to improve air quality, energy security, and help achieving climate change goals. We analyzed the demand for new car fuel economy in the UK with a two-stage econometric model to examine the drivers of this demand in the short and long terms over 1970-2004. It was found that higher incomes and long-term price changes were the major drivers to achieve improvements in fuel economy, especially for petrol cars, and that new car fuel economy changes were seldom affected by the Voluntary Agreement on CO2 emissions reductions executed in the 1990s. We found, supporting other studies, that the demand for fuel economy was price inelastic for both fuels. Our estimated long-term income elasticity (petrol with −0.31 and diesel fuels with −0.20) values are above the range of international studies for petrol but fit in the range for diesel. An aggregate model of fuel economy gives a fuel price elasticity of −0.32 and an elasticity of −0.26 to UK disposable income. |
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