Assessment of Fuel Economy Technologies for Medium and Heavy ...

Oum et al 4 collected 17 estimates of freight transportation demand price elasticities. The authors
focused on self-price elasticities and presented elasticity figures as both a range and a most likely
estimate. The authors found that transportation is relatively inelastic since it is a derived demand
– transportation demand only exists because there is demand for other products or services –
with the exception of freight shipments that are subject to intermodal rail competition. The paper
found truck self-price elasticity to fall in the range of -0.05 to -1.34 with the most likely range of
-0.7 to -1.10 (the measures of demand were not identified and varied by study). 5 Furthermore,
while the general literature on road transportation elasticities has distinguished short-run vs.
long-run effects, this has not typically been done in the literature on truck elasticities.
A more recent study by Christides and Leduc reviewed recent price elasticity literature for use in
a truck size and weight study for the European Commission. 6 The literature review collected
self-price elasticities ranging from -0.3 and -1.75 and cross-price elasticities ranging from 0.11 to
1.9. For use in their study, they selected values of -0.416 for truck self-price elasticity, measured
in tons, and 0.38 for rail cross-price elasticity, measured in tons.
Graham and Glaister, 7 in a comprehensive review of recent price elasticity results, found that
truck self-price elasticity is likely to fall between -0.5 and -1.5, but did not identify a demand
measure. The Federal Highway Administration (FHWA) used a self-price elasticity of -0.97,
measured in vehicle-miles, for a freight benefit and cost study. 8 A study for the National
Cooperative Highway Research Program 9 cited a rail cross-price elasticity of 0.52 based on the
Intermodal Competition Model 10 and identified a range of cross-price elasticities between 0.35
and 0.59 from an analysis of Class 1 railroads. 11
Approach: To estimate the potential rebound effects and resulting effects on fuel consumption it
is necessary to describe a base case and to develop potential fuel economy improvement
alternatives. It is necessary for the base case to describe current truck and rail volumes; truck and
rail fuel economy; truck and rail fuel consumption; average truck operating cost per-mile; and
truck purchase price. For alternatives, it is necessary to describe the potential fuel consumption
4
Oum, Waters, and Jong Say Yong, ―A Survey of Recent Estimates of Price Elasticities of Demand for
Transport,‖ prepared for the World Bank, Infrastructure and Urban Development Department, January
1990.
5
While the authors find that demand is ―relatively inelastic‖ this is not always the case, as an elasticity
of 1.0 or -1.0 can be considered a dividing line between ―elastic‖ and ―inelastic,‖ with higher (absolute)
values considered elastic.
6
Christidis and Leduc, ―Longer and Heavier Vehicles for freight transport,‖ European Commission Joint
Research Center‘s Institute for Prospective Technology Studies, 2009.
7
Graham and Glaister, ―Road Traffic Demand Elasticity Estimates: A Review,‖ Transport Reviews
Volume 24, 3, pp. 261-274, 2004.
8
HDR-HLB Decision Economics, Inc. and ICF International, Freight Benefit/Cost Study: Phase III Analysis
of Regional Benefits of Highway-Freight Improvements, prepared for the Federal Highway Administration
Office of Freight Management and Operations, February 2008.
9
Cambridge Systematics, Inc., Characteristics and Changes in Freight Transportation Demand: A Guidebook
for Planners and Policy Analysts Phase II Report, National Cooperative Highway Research Program
Project 8-30, June 1995.
10
Scott M. Dennis, The Intermodal Competition Model, Association of American Railroads, September 1988.
11
J. Jones, F. Nix, and C. Schwier, The Impact of Changes in Road User Charges on Canadian Railways,
prepared for Transport Canada by the Canadian Institute of Guided Ground Transport, Kingston,
Ontario, September 1990.
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