• Christopher Knittel is the William Barton Rogers Professor of Energy Economics at the MIT Sloan School of Management.

    Photo: M. Scott Brauer

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Fuel for thought

Economist Christopher Knittel uncovers surprising facts about the cars we drive — and about the price of gas.


Like a lot of economists, Christopher Knittel entered college with career plans in mind. Unlike a lot of economists, Knittel had plans that involved baseball. At California State University at Stanislaus, Knittel was good enough to make the team as a second baseman. But during his freshman season, reality sank in.

“I quickly learned the pros weren’t in my future,” says Knittel, a lifelong Oakland A’s fan who played baseball recreationally until his mid-30s.

Christopher Knittel
Christopher Knittel
Photo: M. Scott Brauer

For a while in college, Knittel also considered becoming an attorney. But then, he says, “I took my first economics course and fell in love with it. Economics teaches you how to think and you constantly see real-world examples of the concepts you’re learning.”

Today, Knittel is the William Barton Rogers Professor of Energy Economics at the MIT Sloan School of Management, having joined MIT earlier this year. He is known for inventive, heavily empirical work largely focusing on energy and transportation, although he has studied electricity markets and corporate strategies as well.

Knittel’s research addresses a clutch of practical and linked questions: How much progress have automakers made on fuel efficiency? (More than you might think.) How do car owners respond when fuel prices rise? (They really do ditch their gas-guzzlers.) How large are the collateral health benefits of removing dirty vehicles from the nation’s fleet? (Very large.)

All told, Knittel has produced concrete findings that he hopes will have an impact in the halls of Washington. “A lot of energy policies that we have are not the most efficient policies,” he says. “I want to inform policymakers what the true costs and benefits of certain policies are.”    

Detroit: Actually more fuel-efficient

Knittel mostly grew up in Northern California, where his father was an engineer for Peterbilt, the truck manufacturer. In addition to baseball, he developed a liking for cars and learned to replace the engine in his Ford Mustang while in high school.

After getting his undergraduate degree, Knittel (pronounced with a hard “k”) received his M.A. in economics from the University of California at Davis, then got his PhD in economics from the University of California at Berkeley in 1999, after his graduate adviser, Severin Bornstein, moved from Davis to Berkeley. Knittel taught for three years at Boston University before returning to U.C. Davis, where he remained until joining MIT.

“A lot of my work draws on the hard sciences,” says Knittel, 39. “Davis was great, but there’s no place like MIT, in terms of the opportunities to do quality interdisciplinary work.”

In a sense, Knittel is still looking under the hoods of cars. One of his papers, “Automobiles on Steroids,” recently published in the American Economic Review, examines technological progress in the auto industry. From 1980 through 2006, the fuel efficiency of America’s vehicles has increased by just 15 percent — at first glance, a lethargic rate of improvement. But as Knittel points out, cars’ average horsepower has roughly doubled since then, and average curb weight of those vehicles rose 26 percent during that time. Adjusting for these changes, fuel economy has actually increased by 60 percent since 1980, but as Knittel observes, “most of that technological progress has gone into [compensating for] weight and horsepower.”

On the stagnation of overall fuel efficiency since 1980, Knittel adds, “It’s no fault of the manufacturers and consumers. Firms are going to give consumers what they want, and if gas prices are low, consumers are going to want big, fast cars. If you’re going to blame anyone, it’s the policymakers for not creating the incentive structure for putting that technological progress into fuel economy.”

Pain at the pump

Cars and light trucks produce about 15 percent of U.S. greenhouse gases. The best policy for reducing energy consumption from those sources, Knittel believes, would be higher fuel prices. “That would incentivize all the things we want,” Knittel says. “When gas prices go up, people shift to more fuel-efficient cars, they drive fewer miles, and insofar as there are lower-carbon-intensive fuels out there, people shift to them. They get rid of their clunkers faster.”

That’s not just an assumption; Knittel has studied the responses of auto owners nationwide to rising gas prices from 1999 to 2008 in another research paper, “Pain at the Pump,” co-authored with Meghan Busse and Florian Zettelmeyer of Northwestern University. The researchers found that with each $1 rise in the price of gas, purchases of highly fuel-efficient autos increase 21 percent, while purchases of gas-guzzling vehicles drop 27 percent.

A shift to newer, more fuel-efficient vehicles would actually help people in another way, besides releasing fewer greenhouse gases: It would reduce the amount of harmful local pollution in the air, as Knittel detailed in a paper written with Ryan Sandler of U.C. Davis, based on a study of California from 1998 to 2008. “When gas prices go up, you’re getting bigger mileage reductions from cars that are worse in terms of these pollutants,” Knittel observes.

That produces significant health benefits beyond the problems associated with climate change. “We’re talking about asthma attacks and respiratory problems,” he adds. “This isn’t just a matter of helping the world two generations from now. You can point to this and say, ‘Here is a more immediate, salient reason for a gas tax.’” According to Knittel and Sandler, 70 percent of the costs of a gas tax of $1 per gallon could be recouped by immediate health benefits from reduced pollution. Other possible benefits from the tax — reductions in climate change, traffic congestion and accidents — could make it a net winner for people in economic terms alone.

But will politicians ever impose higher gas prices on a financially stretched public? A variety of powerful lobbying interests in Washington oppose such a move — and Knittel knows hardball when he sees it. Indeed, Knittel is examining the financial rewards industries reap from their lobbying efforts in some of his current research. Still, he does retain a sense of optimism. “The idealistic academic in me says that the more you broadcast the truth, the more likely it will be to win out,” Knittel says. “But we’ll see.”


Topics: Automobiles, Business and management, Climate change, Economics, Efficiency, Energy, Faculty

Comments

While you raise gas taxes to fund your "idealistic academic" theories, I'm a working Dad who's trying to keep food on the table. I already own two 4-cylinder cars with no plans or funds to replace them within the next decade... how am I supposed to get where I need to go when prices are already exorbitant? The model you should promote is taxing the oil companies who are posting record profits while I (and most others like me) sink lower into debt. And why? Just last week prices jumped 50 cents overnight. Whats driving these hikes? News of unrest over in Syria? Options traders milking the system? Politicians lining their retirement portfolios? Please don't dump this burden on me, dude. There are others far more able to shoulder it out there. The American "middle class" (if there even is such a thing anymore) isn't able to carry any more. We're maxed out!
When I was reading this article it made me realized that there are always another side to the story. I am from Canada and we also felt there rising price of fuel and it always not only hate but animosity towards the Oil Company for making so much money at the expense of the middle class. But after reading the article it make perfect sense to me that by increasing the price of fuel at the pump will decrease the amount of green house gases we all produce. I myself drive my car less than what I used to. If we raise the taxes in fuel people will think twice about using public transportation. If the demand in fuel keeps rising I/we as consumer will more than likely drive less and will strongly support public transportation. I am also a father of two and I felt the same way but If we try to understand what this article is intended to IT MAY PERFECT SENSE.
For politicians to artificially impose higher gasoline prices on the American public rather than let the market forces dictate them is a dangerous idea. Government intervention in the free market in order to satiate the very elusive ideal of eliminating anthropogenic climate change will only cause the country to sink further into a state of deprivation of available goods and foodstuffs. Inexpensive, ubiquitous energy has done more to improve the quality of life and free individuals from the drudgery or survival than any other technological advance. Lucky for us politicians need votes. Profit is not a dirty word. It is what drives innovation.
I live in Norway, where we pay $9.42 per gallon at current exchange rates. There are no gas price riots here — it is a question of what the public is used to. People to be taxed this way (for something that pollutes and is negative) than to be taxed for productive work (income tax) or for spending our money (sales tax/VAT). @mzungu: What I think the guys in your situation should be demanding is that a gas price hike be compensated by tax cuts specifically aimed at the non-rich. The increase in gas tax should not be a way of raising overall taxes, just of aligning incentives. [Yes, this would still hurt those who drive more than others, to the advantage of those who drive less]. @miked: I guess we have to disagree over whether it makes sense or not to try to limit climate change (and US dependence on oil exporting countries). However, the point Knittel has demonstrated is that IF we want to keep gas consumption somewhat down, THEN a gas tax is a good way to go.
Will this strategy signifantly increase the price of food/products transported by highway? Also, public transportation uses gas and oil, too. For now...
IF the goals in the article are to be achieved, then: 1. Tax on fuel 2. Tax on cars related to fuel consumption per weight units 3. Tax the more heavy a car is 4. Tax reduction on 1. and 2. if car is used in business Create a tax formula that puts a moderate or no increase on fuel tax and cars with low per weight consumption.
We need a gas tax combined with income redistribution so that those at the bottom of the social pyramid, those "just making ends meet", will not be unduly hurt by the increase in costs. Note well that you receive the income redistribution REGARDLESS of whether you get a more fuel-efficient, money-saving, car, so the this policy preserves the incentives for people to improve their cars.
Yes indeed that all Public Transportation uses gas and other green house contributor but If we decrease the amount of driving we all do it not only help the environment but it will drive the price down at the pump. We all know the idea of supply and demand If I/WE as a consumer decrease our dependency in non renewable energy your comments "public transportation uses gas and oil too. For now.." oil company will lower the price at the pump because we as consumer decided to take public transportation. Mr Knittel article not only made me realized that as a consumer I need to see both sides of the argument and for that I thank him. LET THEM INCREASE THE TAXES IN FUEL BECAUSE IN THE END ALL OF US WILL SEE THE VALUE OF ALL RENEWABLE ENERGY AND WE BECOME LESS DEPENDENT IN FOREIGN OIL.
miked wrote: Profit is not a dirty word. It is what drives innovation. In my experience as an engineer it's been a passion for making things right that's driven innovation. And I've witnessed a passion for profit produce quite a lot of quick, and dirty.
I wish we could help the middle class to compensate for the negative side of a gas tax but people must be made to drive less and buy smaller efficient cars. Maybe we could use the tax money for better schools or school catering services of organic whole meals, anything that would help working parents. However, as much as I dislike the idea of taxing the middle class further, I can only agree with a gas tax. This is not an idealistic academic theory. Families in Europe get by with a fraction of the earnings and costs of driving that are 4 times greater than here. Europeans are not greener or smarter than Americans. They drive less and buy smaller efficient cars because gas is expensive ... Along the mediterranean I saw many "VW golf"-type cars with 3 children/baby seats in the back and a parisian license plate.
..only drink green tea and never eat sugar or Oreos and we should all awaken at 6am and go to sleep each night exactly at 10pm. That makes as much sense as "People must be made to drive less and buy smaller more fuel efficient cars." I don't tell you how to live your life, don't tell me how to live mine. And get your re-distributionist hands off my $$. Gov't redistribution never works. Every country that has engaged in it is TRILLIONS of $$ in debt today; the US being at the top of the list. And yet the problems that they intended to solve with the redistribution loom larger than ever. The US is not Europe and vice versa. Look at the geography and population density. The US needs a cost-effective means to move goods within its vast borders -- can't do that w/o the combustion engine. And spare me the Prius -- it runs on coal. BTW, how has the recent gas price runup killed the recent stock market rally? Quite handily, I'd say.
In addition to the climate change and health/pollution reduction benefits mentioned in the article, the US energy security would be enhanced. Reduced gas consumption would make the US less dependent on imports from volatile regions, enhancing our security. It only makes sense...but I'm not hopeful that the politicians and politics will support increasing the tax to reduce consumption.
Why not have a federal excise tax on overweight gas guzzlers, hitting those who choose to drive overweight vehicles without forcing a burden on everyone. Toyota salesmen have told me that Toyota dropped station wagons because SUVs have a higher margin. Someone ought to look at whether the manufacturers conspired to eliminate wagons to drive up the price of hatchback type vehicles.
Mike D, I think the data Prof. Knittel and colleagues have collected shows that there are very significant collateral costs to burning a gallon of gas. They mention $0.70 for health care cost impacts alone, but don't touch on the Defense spending related to securing oil supply in the middle east and elsewhere (perhaps several dollars per gallon?), the costs of maintaining roadway infrastructure which is strongly correlated to ton-miles of travel, also related to gallons consumed (again, perhaps several dollars per gallon?). Their tax proposal simply shifts more of this actual direct burden onto the direct consumer, and is therefore balancing the equation so market forces more accurately balance cost and price. Much of the developed world has made these tax adjustments and the jump to better efficiency and usage patterns. Due to the uncontrolled financial force that oil interests can exert on our US politicians, it is hard to imagine Prof. Knittel's sensible voice ever being heard...
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