Vehicle efficiency improvements, urban form, and energy use impacts

Abstract

Through their effects on urban form, energy policies can induce complex feedbacks that influence their energy use impacts. Given the large and rapidly increasing share of global energy consumption occurring in cities, understanding the interactions between energy and urban form will be critical to ensure effective policies and avoid unintended consequences. In this study, we develop a theoretical framework to investigate these interactions. We focus in particular on the systemic impacts of improving vehicle fuel efficiency. We prove analytically that raising vehicle fuel efficiency induces a more compact urban form if households are underinvesting in efficiency, but a more sprawling urban form if efficiency is increased beyond the rational household optimum. In the former case, the urban form adjustment further reduces energy use in the transportation and residential sectors. In the latter case, the urban form adjustment increases vehicle travel, which offsets at least some of the direct reduction in transportation energy use stemming from the efficiency improvement (direct rebound). In addition, its larger homes demand more energy in the residential sector (indirect rebound). Our theoretical analysis is followed by numerical illustrations. Most generally, we highlight the presence and significance of urban form feedbacks for energy policy outcomes in cities.