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This week, Economic Policy is holding its 78th conference in Madrid. On this occasion, Natalia Fabra and Mar Reguant will participate in a panel session at the Bank of Spain this Friday, where they will discuss a presentation by Thiemo Fetzer entitled “Distributional and climate implications of policy responses to energy price shocks”.

The session will take place on Friday 20 October at 11:15 CEST. Watch the live stream here: economic-policy.org/videos/

The full programme of the conference is available here: economic-policy.org

EnergyEcoLab will participate in a two-days workshop on energy economics on October 10 and 11 in Toulouse, hosted by the Toulouse School of Economics. Natalia Fabra will be chairing the wednesday session, and several presentations will be given by collaborators and past visitors of EnergyEcoLab:

• David Andrés-Cerezo – “Renewable Energy and Storage: Friends or Foes?”
• Clément Leblanc – “Designing Contracts for Renewables: An Incentive-Risk trade-off”
• Gerard Llobet – “Fossil Fuels and Renewable Energy: Mix or Match?”
• Mateus Souza – “The Tragedy of the Common Heating Bill”

Other presentations include:

• Matti Liski – “Pigouvian Income Taxation”
• Graham Macklin – “Optimal Subsidies for Intermittent Renewable Energy”
• Elise Viadere – “Do energy communities foster demand-side flexibility? Evidence from a Belgian pilot project”
• Dongchen He – “Investment in flexibility and reserve markets”
• Claude Crampes – “Assistance to electricity consumers with price misperception”
• Iivo Vehvilainen – “Climate policy and asset values. Evidence from microdata on car purchases”
• Leticia Pieraerts – “The architecture of electricity day-ahead markets and incentives for flexibility provision”
• Bert Willems – “Auction with precommitment”

The full program is available here.

N.B.: Participation is by invitation only.

In a project funded by “la Caixa” Foundation, Natalia Fabra, Catarina Pintassilgo and Mateus Souza have studied the benefits of free-floating car-sharing (FFCS) services to alleviate congestion and air pollution.

Congestion and air pollution are pressing problems in many cities worldwide. To alleviate them, policymakers are considering various options, from congestion pricing to low-emissions zones. One possibility is free-floating car-sharing (FFCS) services, which allow users to rent electric vehicles by the minute without pick-up or drop-off location restrictions within the company’s service area. Beyond increasing mobility options, FFCS can reduce congestion and emissions in cities as it promotes higher utilisation rates of green vehicles. This article analyses FFCS usage patterns based on trips made in Madrid during 2019. It has been observed that there are complementarities between FFCS and public transport in middle-income areas with limited public transport options.

Key Points

1. The effects of introducing free-floating car-sharing (FFCS) depend on the incomes of the exposed individuals. FFCS service areas typically cover high- and middle-income neighbourhoods, reducing the possibility of low-income individuals to use the service. Yet, the most loyal members of the car-sharing service live in middle-income neighbourhoods.
2. The reduced public transport network coverage in middle-income neighbourhoods suggests that most loyal customers use FFCS as a complement to public transport when they have few travel alternatives.
3. In addition, these neighbourhoods register the highest rates of car ownership (i.e., number of cars per household). The analysis thus indicates that most loyal car-sharing members use the service as a substitute for private vehicles to complement the existing public transport network.
4. Based on travel frequency, results indicate that most loyal customers are more likely to use FFCS for leisure purposes, and less likely to use it during commuting hours. Even if these users are unable or unwilling to pay for car-sharing for their regular commutes, the service is a valuable option in the absence of public transport alternatives, particularly at night.
5. Additionally, the use of FFCS peaks earlier than overall traffic, with the number of car-sharing trips dropping significantly during the usual morning traffic peak. FFCS is also broadly used during the summer months, conversely to overall road traffic. These patterns suggest that FFCS contributes to smoothing overall traffic and, thus, reducing congestion in the city.
6. However, the achievement of these effects will depend on how the FFCS is used and whether it is accompanied by a reduction in the number of private cars. Unless certain conditions are met, this strategy may have the opposite effects to those desired.

Road transport is associated with several types of negative externalities, including traffic accidents, congestion, and local pollution that causes increased mortality. Additionally, car ownership in cities may lead to inefficient land use. On average, private cars have low usage rates (they are parked 96% of the time), an inefficiency that is exacerbated by the increasing single-occupancy vehicle commuting rates.

Several policies are being implemented to mitigate these externalities, including congestion pricing, electric vehicle purchase subsidies, and low-emission zones. To improve the effectiveness of these policies, a deeper understanding of their effects is required on two fronts: a) the benefits and costs of the various policy options and b) their distributional implications (i.e., whether benefits/costs are accrued by lower or higher income individuals).

This study analyses the characteristics of users and usage patterns of a relatively new service: free-floating car-sharing (FFCS). In part thanks to advances in communications and tracking technologies, as well as the widespread adoption of smartphones, companies are now able to offer car rentals by the minute, allowing users to pick up the vehicle and drop it off at any place within a given service area. Importantly, the companies providing these services often do so with electric vehicles.

1. A key trade-off

FFCS can potentially affect congestion and environmental externalities in opposing directions, depending on which mode of transport it is substituting. On the one hand, FFCS may alleviate urban congestion and pollution if it reduces car ownership (car shedding) or the number of trips with private polluting cars. This possibility is supported by shared vehicles being mostly electric and having much higher utilisation rates than private vehicles. On the other hand, car-sharing may increase congestion if used as a substitute for public transport, walking, or cycling. Whether one effect or the other dominates is an empirical question related to the usage and substitution patterns of FFCS.

2. A look at neighbourhood characteristics and car-sharing patterns

The research drew on a unique proprietary database that contains the universe of car-sharing trips in 2019 carried out by one of the leading FFCS companies in Madrid. That information was combined with neighbourhood-level data on population, income, car ownership, and public transport network to correlate car-sharing usage patterns with socio-demographic characteristics. Additionally, daily road traffic data was compared against the seasonality of car-sharing trips.

Due to privacy constraints, the residential address of the car-sharing members was not provided by the FFCS company. To overcome this limitation, users’ neighbourhood of residence was imputed by exploiting the frequency with which the same member starts and ends a trip in the same location, which was treated as a proxy for neighbourhood. To achieve the preferred specification, different frequencies, starting times, and days of the week were explored. This made it possible to identify users living in 95 out of the 96 neighbourhoods covered by the FFCS service in Madrid. Furthermore, the hourly frequency of repeated origins and destinations made it possible to infer whether the purpose of each trip was leisure or commuting.

3. Is there evidence supporting complementarity between car-sharing and public transport?

To provide insight on the impacts of FFCS, car-sharing usage was linked with car ownership and the public transport network. In downtown Madrid, car ownership rates are relatively low, which is likely explained by low parking availability and abundant public transport options. This correlated positively with a low usage of FFCS, with only 7.4% of all car-sharing trips starting or ending in this district. On the contrary, the periphery generally exhibits a high rate of car ownership and a lower coverage of metro and bus stations. Most loyal FFCS customers tend to live in these suburban neighbourhoods. Hence, residents in these areas seem to own a car to counter insufficient public transport options.

This evidence is consistent with FFCS in Madrid being used as a substitute for private vehicles and as a complement for public transport. Given that the car-sharing fleet tends to be fully electric, if car-sharing customers reduce usage of their private car, FFCS could lead to an overall reduction of vehicles in cities and, consequently, to decreased road traffic and improved air quality. Moreover, FFCS and private vehicles differ substantially in usage rates (i.e., the share of hours that the vehicles are actually on the road). The average usage rate of FFCS vehicles is 14.6%, thus considerably higher than that for private vehicles (only 4%). This implies that car-sharing allows for a more efficient use of parking space.

4. Is there evidence that car-sharing alleviates local congestion?

The seasonality of car-sharing trips closely matched the trends of other motorised vehicles. However, car-sharing peaked earlier. Moreover, while road traffic decreases during summer, car-sharing trips were highest in July and September. Hence, FFCS smoothed road traffic, contributing to reducing overall congestion. A potential reason for this finding is that the car-sharing service is paid for by the minute, encouraging users to avoid periods of intense road congestion

Furthermore, the car-sharing service experienced greater usage during workdays, particularly on Fridays. Nonetheless, most loyal customers were more likely to use the service during the weekend, for leisure purposes, and less likely to use it for commuting. Importantly, most loyal members lived in neighbourhoods with fewer public transport options, which are scarcer during weekends. Even if these users are unable or unwilling to pay for car-sharing for their regular commutes, the car-sharing service is a valuable option in the absence of public transport alternatives.

5. What is the correlation between car-sharing users and income?

The FFCS service is only available in high- and middle-income neighbourhoods, reducing the possibility of usage by low-income individuals. Indeed, the average annual net income of car-sharing users in the study sample was close to €20,000, thus higher than the average for the entire municipality of Madrid (€16,700). FFCS might be more affordable than owning a car, but it is still more expensive than public transport. This means that this service might not be accessible or attractive to some income groups.

Moreover, customers who used the service more intensively lived in middle-income neighbourhoods that, as previously mentioned, are characterised by high rates of car ownership and fewer public transport options. In fact, loyalty was a much stronger predictor than income for the probability of taking a car-sharing trip, which suggests that car-sharing usage intensity may not be strongly associated with income but rather with other factors, notably the lack of mobility alternatives.

6. Limitations

The patterns of use and the characteristics of the users of FCCS in Madrid depend on several variables that might be time and location specific. For instance, usage depends on the availability of car-sharing vehicles in the city, which directly impacts willingness to use car-sharing. Usage also depends on the availability of other modes of transport, and their associated costs, including the monetary costs and the time involved, which in turn depend on the average traffic conditions and the availability of parking. Therefore, some of these findings might not extend to other municipalities or other times.

7. Free-floating car-sharing reduces congestion and emissions when used as a substitute for private vehicles

Beyond increasing mobility options, FFCS can reduce congestion and emissions in cities as they promote higher utilisation rates of green vehicles. However, to unlock these benefits, users must see FFCS as a complement to public transport that allows them to move away from private vehicles. The present analysis of usage patterns in Madrid has shown descriptive evidence consistent with this hypothesis. Moreover, while not available in lower-income areas, car-sharing benefits users in middle-income areas, who tend to use the service more frequently, probably due to scarcer public transport alternatives. Furthermore, the usage patterns of car-sharing do not perfectly correlate with overall traffic, suggesting that they can smooth congestion.

8. References

FABRA, N., C. PINTASSILGO, y M. SOUZA (2023). «Observed Patterns of Use and Users of Free-Floating Car-Sharing», EnergyEcoLab Working Paper 117, Universidad Carlos III de Madrid.

This article was initially published by the Social Observatory of “laCaixa” Foundation. A Spanish version is available here.