During the past thirty years, governments have sought to stimulate improvements in new car fuel economy to contribute to air quality, energy security, and climate change goals. The e demand for new car fuel economy in theUK was analysed using a two-stage econometric model to investigate the drivers of this demand in the short and long terms over the period 1970-2004. We found that higher incomes and long-term price changes were the main drivers to achieve improvements in fuel economy, particularly for petrol cars, and that new car fuel economy changes were scarcely affected by the Voluntary Agreement on CO2 emissions reductions adopted in the 1990s. We found, in agreement with other studies, that the demand for fuel economy wasprice inelastic for both fuels. Our calculated long-term income elasticity (petrol with -0.31 and diesel fuels with -0.20) values are above the range of international studies for petrol but within the range for diesel. Anaggregate model of fuel economy gives a fuel price elasticity of -0.32 and an elasticity of -0.26 with respect to UK disposable income. (Author/publisher).
Abstract