The Impact of Climate Change on Passenger Vehicle Fuel Consumption: Evidence from U.S. Panel Data

Climate change is around us today and will affect human life in many ways. More frequent extreme weather events raise mortality and car accident rates, global warming leads to longer growing seasons for crops, which may change farmers’ crop choices, and the relationship between energy demand in residential buildings and weather is widely investigated. In this paper, we focus on the impact of weather on energy consumption, in particular, gasoline consumption through the more frequent use of both vehicles themselves and the air conditioner of the vehicle that decreases fuel economy, which has not been paid enough attention in the literature. We estimate the relationship between fuel consumption and weather using unique U.S. panel data. We find that hot days increase gasoline consumption, but in contrast to the results of residential energy consumption literature, there is no statistically significant effect on cold weather. With climate prediction data from General Circulation Models (GCMs), we simulate the impact of climate change on fuel energy consumption. The results show that the fuel consumption in the transportation sector may increase by up to 4% under the “business-as-usual” (RCP 8.5) scenario. Also, climate change has heterogeneous impacts across the continental United States.