Vehicle Fuel Economy and Vehicle Miles Traveled: An Empirical Investigation of Jevon’s Paradox

Abstract There has been, in recent decades, a concerted effort to promote energy efficiency as a means to reduce energy consumption. The general thesis is that, ceteris paribus, an increase in energy efficiency leads to a decrease in the consumption of the good or service rendered efficient. This is in opposition to Jevons’ Paradox which states that “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth…” This study examines whether Jevons’ Paradox holds when all available factors that could affect consumption of an efficient good/service are controlled for. Using vehicle fuel economy as a measure of energy efficiency and vehicle miles travelled (VMT) as a measure of consumption, the study examines whether, other things being held equal, a more fuel efficient vehicle accrues greater Vehicle Miles Traveled. The findings indicate that in this case Jevons’ Paradox does hold true; a 1% increase in fuel efficiency was associated with a 1.2% increase in VMT.