Abstract
The Brazilian Alcohol Program promotes ethanol as an alternative fuel to gasoline. Policymakers want to know the effect of relative fuel prices on demand for gasoline-fuelled and alternative fuel vehicles (AFVs). Considering vehicle engines dedicated to gasoline, ethanol or flex in the Brazilian market, we use market share models to estimate fuel price market share elasticities, both own and cross effects for each technology. In the first phase, when gasoline and ethanol are the only competing technologies, we find that variations in price profoundly impact the market share of new vehicles. The second phase shows how the efficiency of flex engines, reflected by the car cost per kilometre, significantly contributes to the widespread acceptance of this technology. The near-zero elasticities indicate that the market share of flex vehicles is hedged against price fluctuation. The study provides useful suggestions to help policymakers accelerate the socio-technological transition towards renewable and cleaner energy.
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