Fuel efficiency and emission in China's road transport sector: Induced effect and rebound effect

- We estimate the induced effect and rebound effect in China's road traffic system.
- We prove the effectiveness of fuel efficiency policies.
- High price of new car cannot inhibit Chinese demand for cars currently.
- Rising fuel price didn't spur people to alter energy-saving vehicles in China.

The main objective of this paper is to analysis how endogenous road capacity, in term of an increase in road accessibility and traffic demand (“induced effect”), exogenous efficiency policies and technological progress, in term of an increase in fuel efficiency (“rebound effect”), affect fuel consumption and thereby exhaust emission finally, the empirical estimate a simultaneous equations system of the road traffic demand, fuel consumption, exhaust emission, using the annual data of 1985-2013, we discuss the transmission mechanism of effects caused by road capacity and fuel efficiency policies, and we estimate the induced effect and rebound effect further than the previous studies, and found that the rebound effect and induced effect in China are larger than most studies of the U.S. We also prove the effectiveness of fuel efficiency policies to improve fuel efficiency, however, little help to reduce vehicle emission. In view of the pricing policy, we found that high price of new vehicle cannot inhibit Chinese demand for cars currently, what's more, rising fuel price did not encourage people to purchase energy-saving vehicles in China.