Ottawa's Auto Feebate Program on Right Track, But Needs Retooling: C.D. Howe Ins

In the study, "Deals on Wheels: An Analysis of the New Federal AutoFeebate," policy analyst Robin Banerjee, supports the use of feebates sincethey provide a financial incentive for consumers and manufacturers to shifttowards more fuel-efficient vehicles by subsidizing fuel efficiency and taxingfuel inefficiency.

But the current feebate should apply to more vehicles to eliminate a"black hole" in the number and models of vehicles affected. Currently, thegovernment's ecoAUTO rebate program offers a rebate of between $1,000 and$2,000 for cars with fuel efficiency levels better than 6.5 litres per 100 kmor light trucks achieving better than 8.3 L/100 km. In practice only 10 carmodels and nine truck models are eligible for rebates for the 2006 and 2007model years. On the tax side, the Green Levy on Fuel Inefficient Vehiclesimposes a tax that starts at $1,000 for vehicles that use between 13 L/100kmand 14 L/100 km and proceeds in $1,000 steps for every litre increase inconsumption up to 16 L/100km. Most vehicles fall in between the rebate programand the tax penalties.

Banerjee notes that steps to provide greater incentives to switch tolower-emission vehicles must be balanced by an attempt to minimize adverseconsequences on the auto industry. Feebate programs should take effect with atimetable, or a phase-in period, he stresses. This gives manufacturers time toadjust their models, develop new technologies and thus hasten the switch tomore fuel-efficient vehicles at the manufacturing level. Finally, Banerjeesays that the federal government's feebate program must be a part of a largerstrategy employing market-based incentives, such as fuel taxes, a carbon taxor mileage-based charges, to reduce greenhouse gas emissions.

For the study go to: .

For further information

Robin Banerjee, Policy Analyst, C.D. HoweInstitute, (416) 865-1904,