Inducing Demand by Expanding Road Capacity: Controlling for the Rebound Effect

Abstract

Expanding road capacity and raising fuel economy are two policy mechanisms to mitigate greenhouse gas (GHG) emissions, but each is susceptible to feedback effects that might offset their overall effectiveness at promoting sustainable transportation. Expanding road capacity engenders more traffic through the induced demand effect and raising fuel economy encourages more use through the rebound effect. Research on each feedback effect is evident in the sustainable transportation literature. However, research on their interaction is lacking. To fill this void, this article analyzes how additional road capacity and higher fuel economy interact to affect individual vehicle kilometers of travel (VKT) in metropolitan areas across the United States. The article pools individual data from the respective 2001 and 2009 National Household Travel Surveys (NHTS) and adopts a novel methodological approach known as multilevel modeling to estimate a three-level VKT model that nests individuals within vehicles within metropolitan areas. Data on fuel economy at the vehicle level provide an accurate estimate of the rebound effect and data on additional capacity at the metropolitan area level provide an accurate estimate of the induced demand effect. Results indicate that the feedback effects do indeed interact to affect individual travel behavior. Further research with three time points of individual data from the NHTS is necessary to establish a trend, but the empirical results suggest that the interaction between these feedback effects decreases their efficacy to mitigate GHG emissions. However, some of these effects could be offset by higher road and fuel prices.