Effects of hybrid engine technology on Canadian light duty vehicle gasoline demand

The effects of hybrid engine technology on the demand for gasoline in the Canadian passenger vehicle fleet are estimated. A demand model based on consumer choice and using 2006 data on Canadian driving patterns provided by Transport Canada and a market survey of hybrid vehicles is developed. The effects of elastic demand for vehicle kilometers traveled are considered. Steady state and transition demands are calculated. The social welfare effects of alternative environmental tax policies are estimated. The conclusion is reached that, while hybrid vehicles will provide substantial benefits to Canadian consumers, market intervention is not warranted on the basis of environmental concerns.