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



    TORONTO, Nov. 22 /CNW/ - As concerns over global climate change continue
to escalate within Canada, the problem of excessive emissions from automobiles
has become a contentious issue. The federal government's current feebate
program is a first step in introducing market instruments to help address
concerns about fuel use, but it has several defects, according to a new study
by the C.D. Howe Institute.
    In the study, "Deals on Wheels: An Analysis of the New Federal Auto
Feebate," policy analyst Robin Banerjee, supports the use of feebates since
they provide a financial incentive for consumers and manufacturers to shift
towards more fuel-efficient vehicles by subsidizing fuel efficiency and taxing
fuel inefficiency.
    But the current feebate should apply to more vehicles to eliminate a
"black hole" in the number and models of vehicles affected. Currently, the
government'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 km
or light trucks achieving better than 8.3 L/100 km. In practice only 10 car
models and nine truck models are eligible for rebates for the 2006 and 2007
model years. On the tax side, the Green Levy on Fuel Inefficient Vehicles
imposes a tax that starts at $1,000 for vehicles that use between 13 L/100km
and 14 L/100 km and proceeds in $1,000 steps for every litre increase in
consumption up to 16 L/100km. Most vehicles fall in between the rebate program
and the tax penalties.
    Banerjee notes that steps to provide greater incentives to switch to
lower-emission vehicles must be balanced by an attempt to minimize adverse
consequences on the auto industry. Feebate programs should take effect with a
timetable, or a phase-in period, he stresses. This gives manufacturers time to
adjust their models, develop new technologies and thus hasten the switch to
more fuel-efficient vehicles at the manufacturing level. Finally, Banerjee
says that the federal government's feebate program must be a part of a larger
strategy employing market-based incentives, such as fuel taxes, a carbon tax
or mileage-based charges, to reduce greenhouse gas emissions.
    For the study go to: http://www.cdhowe.org/pdf/backgrounder_108.pdf.





For further information:

For further information: Robin Banerjee, Policy Analyst, C.D. Howe
Institute, (416) 865-1904, cdhowe@cdhowe.org


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