Vehicle Scrappage and Gasoline Policy / Mark R. Jacobsen, Arthur A. van Benthem.

Format:

Book

Author/Creator:

Jacobsen, Mark R.

Contributor:

National Bureau of Economic Research.

van Benthem, Arthur A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19055.

NBER working paper series no. w19055

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

We estimate the sensitivity of scrap decisions to changes in used car values - the "scrap elasticity" - and show how it influences used car fleets under policies aimed at reducing gasoline use. Large scrap elasticities will tend to produce emissions leakage under efficiency standards as the longevity of used vehicles is increased, a process known as the Gruenspecht effect. To explore the magnitude of this leakage we assemble a novel dataset of U.S. used vehicle registrations and prices, which we relate through time via differential effects in gasoline cost: A gasoline price increase or decrease of $1 alters the number of fuel-efficient vs. fuel-inefficient vehicles scrapped by 18%. These relationships allow us to provide what we believe are the first estimates of the scrap elasticity itself, which we find to be about -0.7. When applied in a model of fuel economy standards, the elasticities we estimate suggest that 13-23% of the expected fuel savings will leak away through the used vehicle market. This considerably reduces the cost-effectiveness of the standard, rivaling or exceeding the importance of the often-cited mileage "rebound" effect.

Notes:

Print version record

May 2013.