In recent years, new technologies and policies have facilitated the improvement of efficiency associated with heavy-duties trucks in the transportation system not only in the USA but also across the globe. Indeed, these improvements to no small extent have reduced the transportation costs of firms in terms of dollars per mile. However, the reduction of the expenses has raised questions about the firm-level reaction to these lower costs. Of particular concern is the aspect of rebound effects associated with the extensive energy consumption that can in some ways offset the current benefits that firms enjoy in the transportation sector. Rebound effects describe the aspect of increased energy demand due to improved energy efficiency. With concerns of climate change being a national and international issue, energy efficiency is currently a primary goal in many countries, regions and the international community. The paper argues the recent energy efficiency improvements to no small extent has changed the demand for energy services in many businesses a factor that has the potential of offsetting the current energy savings at the firm level and national level through rebound effects.
The concept of rebound effects has been researched extensively in the past two decades (Leard, Linn, McConnell, & Raich, 2015). However, the majority of the research has focused on light-duty vehicles utilized for individual and family transportation. The idea of positive rebound effects asserts that as vehicles including trucks used by many firms become more and more efficient, and their operational costs per mile reduce, firms are likely to be motivated to increase their fuel consumption. The increase in fuel consumption can be done either directly through dedicating resources to additional travel or indirectly by passing the fuel savings to the final consumers who in return prompt higher demand for the heavy demand vehicles (Winebrake & Green, 2017). Indeed, firms as profit-maximizing entities tend to make a decision that intends to increase their profit margins through higher service quality, safety and the desire to achieve a competitive advantage.
Many firms utilize heavy-duty vehicles including but not limited to large trucks, vocational vehicles such as buses and dump trucks and utility vehicles in their daily operations. These means of transportation consume a considerable amount of fuel. Undeniably, as technology continues to develop in addition to improvements in policies such as fuel surcharges, the amount of fuel consumed in the transport and distribution sector in firms is likely to continue increasing. In 2013, research indicated the class of the heavy-duty vehicle consumed almost 18 percent of the total transportation energy. Estimates suggest that this amount can grow to more than 30 percent by the year 2040 as companies continue to expand (Winebrake & Green, 2017). The increase in the utilization of energy in the trucking sector has obvious and evident impacts on emissions of greenhouse gases that are associated with climate change. To counter the energy consumption for energy-intensive industries such as the trucking sector, many governments across the globe such as the USA are currently emphasizing the importance of energy efficiency (Llorca & Jamasb, 2017). Notably, in the USA, the US Environmental Protection Agency (EPA) and the National Highway Transportation and Safety Administration (NHTSA) have advocated policies intended to improve heavy-duty fuel efficiency across the country (Tavasszy & Piecyk, 2018). For instance, EPA currently regulates greenhouse gases emissions from trucks while the NHTSA monitors fuel consumption.
However, the ability of these policies being efficient is dependent not only on the strictness of the standards themselves but also on the reaction of the firms particularly those with many operations in the trucking sector. The fact that the current improvements in technologies and policies have the potential impact of reducing the transportation costs of many firms brings the question of how these firms will react in response to the new advocated standards (Guerrero, 2014). In particular, the aspect of rebound effects which might encourage firms to increase their energy consumption either directly through increasing their operations and subsequently transportation costs or indirectly through passing the costs saved on fuel to the customers’ as such increasing demand.
To bring the idea of the rebound effects in mind is essential to acknowledge the trucking sector as one of the most energy-intensive means of transportation principally in comparison with other means of transport such as rail and ship. Moreover, the industry utilizes a lot of fuel with the costs of fuel making almost forty percent of the total operating expenses. Adding to the complexity associated with fuel costs, it is crucial to recognize that trucking is merely a small part of a relatively large supply chain that encompasses shippers and receivers who have contractual in addition to market conditions that to no small extent determines the prices of the transported goods, the shipment sizes in addition to other supply chain management and logistics (Ruzzenenti, 2018). Therefore, firms that are involved in the trucking sector are often required to make decisions that are constrained by various entities including but not limited to suppliers, receivers, competitors in addition to other external factors. The fact that these decisions have a direct impact to fuel consumption and by extension profit margins implies it is necessary for firms to make these decisions consciously. The current regulations intended for energy efficiency add to the already complex system since they change vehicle attributes which have cost implication both positive and negative to a majority of the firms (Matos & Silva, 2011). For instance, it is deductible the cost of acquiring transportation trucks is likely to increase as the manufacturers pass much of the increased manufacturing costs to the firms. However, there are positive aspects associated with the reduced fuel costs at firm-level as such minimizing the firms operating costs as such the aspect of saving costs. The fact that the operating costs of the firms have decreased there is an aspect of rebound effects.
The aspect of increased energy demand is grounded on the decrease in the cost of energy service in addition to the potential of increased consumption of other goods and services due to the excess funds associated with energy cost savings. Rebound effects are based on the fact that vehicle efficiency improvements lower the transportation costs which may influence increased consumption of energy services by the trucking sector due to the vehicle efficiency improvements (Luechinger & Roth, 2013). For instance, a firm may opt for trucks travelling at greater speed or for long distance due to lower costs of fuels. The indirect rebound effect is evident when there are increased consumption of energy-related services by consumers, for instance, the receivers or the final consumers due to the pass-through of fuel cost savings from the trucking sector (Leard, Linn, McConnell, & Raich, 2015). Both the direct and indirect rebound effects contribute to economy-wide rebound effects which describe the ultimate increase in consumption of energy-related services particularly through an increase in transportation activities due to energy-efficiency improvements in the entire trucking sector.
To effectively illustrate how initiatives dedicated to energy-efficiency impact firm’s decisions, consider a national policy in a particular country, say the US that improves the energy efficiency of trucks within a company that the average cost per mile that the organization incurs reduces from the previous 0.80 dollars per mile to 0.60 dollars per mile. If this increase in efficiency results to inefficiency in other sectors for instance increase in empty backhauls or the vehicles are driven less efficiently then direct rebound occurs. Additionally, in the event, the reduction in transportation costs is passed to the customers through lower freight changes in the distribution channel the lower values are likely to prompt higher customer demand as such resulting in indirect rebound effects.
Research in several European countries showcased that rebound effects are not negligible as initially perceived. On average, the study indicated a fuel efficiency of more than 88 percent and the rebound effect of four percent (Llorca & Jamasb, 2017). The fact that both measures declined during the initial years of the sample and increased during the later years between 1992 and 2012 implies that an increase in energy efficiency efforts directly collaborates with an increase in rebound effects. Moreover, countries with more fuel efficiency such as Austria, Germany and Denmark recorded higher rebound effects as compared to their counterparts such as Hungary and Poland who have less fuel efficient and as such documented low rebound effects (Leard, Linn, McConnell, & Raich, 2015). In some countries, the rebound effects reach non-negligible impacts of more than 66 percent. The research concluded there is a necessity for policies that specifically concentrate on reducing rebound effects.
In the last few decades, many firms have grown concerned with the aspect of sustainability as such valuing the opinions of energy and climate policies that are dedicated to the promotion of energy consumption reductions in the energy-intensive parts of production such as the trucking sector. The energy reduction techniques applied intend to reduce energy consumption without affecting traffic flows as such implying improvements in fuel economy. However, the development leads to reduction in the marginal cost of energy service a factor that provides an incentive for increased demand as such rebound effects. With the idea that the rebound effects are not negligible, the current national and international efforts to improve efficiency in the trucking sector are in entirety ineffective. Therefore, to facilitate efficiency in the trucking sector with concerns of climate change, it is vital for energy efficiency technologies and policies to also focus on reducing rebound effects rather than merely concentrating on enhancing energy efficiency.
Guerrero, S. E. (2014). Modeling fuel saving investments and fleet management in the trucking industry: The impact of shipment performance on GHC emissions. Transportation Research Part E: Logistics and Transportation Review, 68, 178-196.
Leard, B., Linn, J., McConnell, V., & Raich, W. (2015). Fuel costs, economic activity, and the rebound effect for heavy-duty trucks. Discussion Paper, 1-49.
Llorca, M., & Jamasb, T. (2017). Energy efficiency and rebound effect in European road freight transport. Transportation Research Part A, 101, 98-110.
Luechinger, S., & Roth, F. (2013). Effects of mileage tax for trucks. University of Lucerne Papers, 1-3.
Matos, F. J., & Silva, F. J. (2011). The rebound effect on road freight transport: Empirical evidence from Portugal. Energy Policy, 39(5), 2833-2841.
Ruzzenenti, F. (2018). The prism of elasticity in rebound effect modelling: An insight from the freight transport sector. Sustainability, 10(8), 2874-2882.
Tavasszy, L., & Piecyk, M. (2018). Sustainable freight transport. Sustainability, 10(10), 3624-3634.
Winebrake, J. J., & Green, E. H. (2017). Environmental policy, decision making, and rebound effects in the US. Trucking sector. Research in Transportation Business and Management.