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October 25, 2005

Canada Questions Feebates

We're a little late on this bit of depressing news. A report issued last week by Canada's National Round Table on the Environment and the Economy recommended against implementing feebates, one of the most promising market tools around for encouraging the purchase of energy-efficient products and for tugging the entire car and truck market toward better fuel efficiency. (The NRTEE was charged with studying feebate options after the idea was proposed last spring.)

Here's their reasoning:

"Instead of using one economic instrument, such as a feebate, the government should develop an integrated and coherent sustainable transportation strategy for Canada focused on all aspects of the transportation sector," the agency said. . . A further study of feebates could be part of that strategy, it added.

Well, sure, nothing wrong with an integrated approach, but feebates could be an important piece of that. They're a much broader solution than NRTEE gives them credit for (and far more far-reaching than tax credits for hybrids, which, strangely, NRTEE does promote).

You can read a whole piece about their promise here, but in short, feebates are what's called a systemic solution--a solution that fixes a bunch of problems at once. They're a plus for the economy, because they help make vehicle price tags tell the truth about the productivity costs of economywide overconsumption of fuel. Because of their structure, they keep the entire market shifting toward fuel savings. They're also a big plus for clean air and a secure climate. And they benefit communities, because inefficient vehicles hemorrhage dollars from local economies.

Finally, with feebates, buyers get paid to choose vehicles that save them money anyway.

The backstory, not surprisingly, is that Canadian automakers are putting the pressure on, citing in this Vancouver Sun story (registration required) that "consumers don't want to be forced into buying vehicles that don't suit their needs."

We'd be willing to bet that these days a wider range of ultra-energy-efficient vehicles--which tools such as feebates will drive the market toward--would suit consumers' needs very well.

Posted by Elisa Murray | Permalink

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