• ITVI.USA
    15,099.680
    22.800
    0.2%
  • OTRI.USA
    24.430
    -0.070
    -0.3%
  • OTVI.USA
    15,075.410
    18.570
    0.1%
  • TLT.USA
    2.730
    0.000
    0%
  • TSTOPVRPM.ATLPHL
    3.070
    0.150
    5.1%
  • TSTOPVRPM.CHIATL
    2.860
    -0.120
    -4%
  • TSTOPVRPM.DALLAX
    1.660
    0.230
    16.1%
  • TSTOPVRPM.LAXDAL
    2.950
    0.110
    3.9%
  • TSTOPVRPM.PHLCHI
    2.040
    -0.090
    -4.2%
  • TSTOPVRPM.LAXSEA
    3.350
    0.100
    3.1%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    15,099.680
    22.800
    0.2%
  • OTRI.USA
    24.430
    -0.070
    -0.3%
  • OTVI.USA
    15,075.410
    18.570
    0.1%
  • TLT.USA
    2.730
    0.000
    0%
  • TSTOPVRPM.ATLPHL
    3.070
    0.150
    5.1%
  • TSTOPVRPM.CHIATL
    2.860
    -0.120
    -4%
  • TSTOPVRPM.DALLAX
    1.660
    0.230
    16.1%
  • TSTOPVRPM.LAXDAL
    2.950
    0.110
    3.9%
  • TSTOPVRPM.PHLCHI
    2.040
    -0.090
    -4.2%
  • TSTOPVRPM.LAXSEA
    3.350
    0.100
    3.1%
  • WAIT.USA
    126.000
    0.000
    0%
American ShipperFuelNewsSustainabilityTechnology

Commentary: Is fuel efficiency a bad thing?

Consider the law of unintended consequences

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.

In all likelihood a majority of the Electoral College will vote on Dec. 14 for the Biden-Harris ticket and the votes will be confirmed by a joint session of Congress on Jan. 6. The new administration will very likely give more prominence to federal environmental policy. The nebulous term “sustainability” will move to the forefront in regulatory and commercial decision-making.

Technological innovations over the past few decades have improved the fuel efficiency of vehicle engines. Other innovations have improved the way energy resources are located and refined into fuel for those engines. Increased fuel efficiency is an objective measure. Tracking devices and artificial intelligence programs are being deployed to optimize timing and routing of deliveries in order to minimize the cost of vehicle idling. Getting more miles per gallon from a given conveyance hauling a given load either occurs or it does not. There is no quibbling. However, is being more fuel-efficient a good thing or a bad thing? The answer is subjective because “good” and “bad” are matters of opinion.  

If a technological innovation lowers the cost of health care or pharmaceuticals and those savings were passed on to patients, would that be a good thing? Most people would probably say yes. After all, preserving life is hard to quibble with. But what if the knowledge that health care and pharmaceuticals being cheaper led people to be a bit more careless with their health and lifestyle? Basically, what if the lower risk and cost of being a patient led to the creation of even more patients? Moral hazard of this sort is an unintended consequence of technological innovations.

Unintended consequences can happen in transportation markets as well. If a vehicle engine is more fuel-efficient, it is less costly to operate. So more fuel-efficient engines developed, say, to cut down on the negative consequences of air pollution might lead to more of it when more transportation is demanded because it is less costly. Similarly, building more and safer infrastructure to relieve traffic congestion may lead to more of it if it attracts more commuters.

The idea that improved efficiency in the production and delivery of a product means more of it will be produced and delivered is something economists call Jevons Paradox. The idea is that while each fuel-efficient conveyance may consume less fuel per mile, the cost savings may induce more miles to be driven either by using the same conveyance or by adding more of them. The paradox is that each conveyance’s fuel burn per mile has fallen (all other things held constant) but total fuel burn has risen. The unintended consequence of this may be that an environmental regulator’s attention is piqued by the extra fuel burn, especially if total air pollution rises in the jurisdiction in question. For instance, under the right (or is it wrong?) circumstances, switching to low-sulfur fuel could, paradoxically, lead to more sulfur in the air if its relative price were low enough. While market forces alone might not lower the price of low-sulfur fuel relative to regular fuel, a well-intentioned government subsidy might. We must beware of any road paved with good intentions. 

Perhaps it would be better for the government to step up incentives for production and use of electric conveyances. The U.S. Environmental Protection Agency notes that the three highest shares of net electricity generation come from natural gas (34%), coal (30%) and nuclear (20%). Hydroelectric power is fourth but its share accounts for only 4%. Each of these sources generates its own negative environmental impacts. These include greenhouse gas emissions, nuclear waste and thermal pollution (i.e., hot water poured into lakes and streams). Of course, one could also include the negative impact on people and wildlife due to allocating large swaths of land to generate and transmit electricity over an extensive network.  

Some might balk at having more conveyances on the road, hauling evermore freight over longer distances simply because it is cheaper to do so. There will be negative impacts on the environment. However, unless logistics costs fall to zero, these impacts are the price we pay for being spread out over a diverse topography. People do not like living close to factories and resource extraction sites.

Tougher environmental regulations on transportation simply spur the drive for more efficiency when its usage is necessary. The only guaranteed way to cut down on transportation-related pollution is to pull conveyances off the road, out of the air, from the water, etc. Pollution levels may go down, but lower supply of conveyances relative to demand for haulage will mean higher freight rates and more expensive inputs and consumer goods. Just another unintended consequence perhaps.

Click here to see other commentaries by Darren Prokop on American Shipper and FreightWaves.

Darren Prokop

Darren Prokop is a Professor of Logistics in the College of Business and Public Policy at the University of Alaska Anchorage. He received his Ph.D. in economics from the University of Manitoba in 1999. Prior to his academic career Darren Prokop worked in government as an economist and in the private sector in inventory planning.

One Comment

  1. I would say Jevons Paradox doesn’t apply to the trucking sector. The number of trucks on the road is almost entirely dependent on the volume of freight available to move, not fuel efficiency or operating costs. Trucks are on the road when freight volumes are high, and trucks are parked when freight volumes are low. Increased fuel efficiency is a nice bonus for those who can afford the newest trucks, but it doesn’t have much bearing on the number of trucks in service.

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