Effects of fuel efficiency improvements in personal transportation

PurposeThe purpose of this paper is to provide an assessment of the effects of fuel efficiency improvements on four‐wheeler ownership, fuel consumption, fuel imports and emissions for personal transportation in the context of India. The paper also aims to measure the rebound effect induced by this policy.Design/methodology/approachThe paper relies on a system dynamics model to analyse the problem. A causal loop model was developed initially, which was transformed to a stock and flow diagram. Simulation was carried out to capture the effects of fuel efficiency improvements in the four‐wheeler sector of India.FindingsThe study has revealed that a policy of fuel efficiency improvements is favourable to the Indian four‐wheeler sector growth, but this policy could result in an increase in fuel consumption and therefore a corresponding increase in the fuel imports and emissions in the country. This policy also induces direct rebound effect that adds up to the already alarming fuel consumption levels.Research limitations/implicationsThe study is limited to four‐wheeler passenger cars in India and gasoline as the transport fuel.Originality/valueThe paper offers a system dynamics model that can aid the government, vehicle manufacturers, and environment protection groups to further analyse policies regarding fuel efficiency improvements, fuel price adjustments, four‐wheeler ownership, energy consumption and emission, and to obtain some useful policy insights before those policies are implemented.