Discussion Papers no. 839

Fuel efficiency improvements – feedback mechanisms and distributional effects in the oil market

We study the interactions between fuel efficiency improvements in the transport sector and the oil market, where the efficiency improvements are policy-induced in certain regions of the world

We are especially interested in feedback mechanisms of fuel efficiency such as the rebound effect, carbon leakages and the “green paradox”, but also the distributional effects via oil price changes for different regions, sectors and oil producers. An intertemporal numerical model of the international oil market is introduced, where OPEC-Core producers have market power. We find that the rebound effect has a noticeable effect on the transport sector, but also on other sectors through lower oil prices in the regions that introduce the policy. There is a small green paradox effect in the sense that oil consumption increases initially when the fuel efficiency measures are gradually implemented. Finally, there will be significant carbon leakages if the policy is not implemented in all regions, with leakage rates of 35 per cent or higher. Non-OPEC producers will suffer more than OPEC producers by fuel efficiency policies due to high production costs.

About the publication

Title

Fuel efficiency improvements – feedback mechanisms and distributional effects in the oil market

Authors

Finn Roar Aune, Ann Christin Bøeng, Snorre Kverndokk, Lars Lindholt, Knut Einar Rosendahl

Series and number

Discussion Papers no. 839

Publisher

Statistics Norway

Topic

Discussion Papers

ISSN

1892-753X

Number of pages

39

Language

English

About Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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