Do Declining Vehicle Attributes Eliminate the Direct Rebound Effect?

Improvements in vehicle fuel economy are often made by reducing vehicle attributes that consumers care about. We estimate the magnitude of the dampening effect of these declining vehicle attributes on the direct rebound effect. We assemble a comprehensive dataset including household-level information, vehicle attributes, gasoline prices, and state-level data. We find that the attribute adjustment mitigates the direct rebound effect by 18-23%. Our estimate of the direct rebound effect is about 0.64 to 0.66 and lies at the upper bound of most prior estimates, resulting in an overall rebound effect between 0.45 and 0.47. Our results provide a best-case scenario for the efficacy of fuel economy standards as a policy instrument to combat climate change.