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Fees and rebates on new vehicles: Impacts on fuel efficiency, carbon dioxide emissions, and consumer surplus

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  • Train, Kenneth E.
  • Davis, William B.
  • Levine, Mark D.

Abstract

Several incentive systems are examined that provide rebates on vehicles with higher-than-average fuel efficiency and levy fees on vehicles with less efficiency. The rebates and fees are applied to new vehicles at the time of purchase, and the rates are set such that the total outlay for rebates equals the revenues from fees. We find that moderately-sized rebates and fees result in a substantial increase in average fuel efficiency. Most of the effect is due to manufacturers' incorporating more fuel-efficiency technologies into the vehicles that they offer, since the rebates and fees effectively lower the price to manufacturers of these technologies. Consumer surplus is found to rise, and the profits of domestic manufacturers are estimated to drop only slightly under most systems and actually to rise under one system.

Suggested Citation

  • Train, Kenneth E. & Davis, William B. & Levine, Mark D., 1997. "Fees and rebates on new vehicles: Impacts on fuel efficiency, carbon dioxide emissions, and consumer surplus," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 1-13, March.
    • Handle: RePEc:eee:transe:v:33:y:1997:i:1:p:1-13
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    Cited by:

    1. Vinayagamoorthi Vasanth & Murugesan Selvam & Kasilingam Lingaraja & Ramachandran Rajesh Ramkumar, 2015. "Nexus between Profitability and Environmental Performance of Indian Firms: An Analysis with Granger Causality," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 433-439.
    2. Nicholas Rivers & Brandon Schaufele, 2017. "New vehicle feebates," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(1), pages 201-232, February.
    3. Fullerton, Don & West, Sarah E., 2002. "Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 135-157, January.
    4. Ye Feng & Don Fullerton & Li Gan, 2013. "Vehicle choices, miles driven, and pollution policies," Journal of Regulatory Economics, Springer, vol. 44(1), pages 4-29, August.
    5. Martin, Elliot William, 2009. "New Vehicle Choices, Fuel Economy and Vehicle Incentives: An Analysis of Hybrid Tax Credits and Gasoline Tax," University of California Transportation Center, Working Papers qt6sz198c2, University of California Transportation Center.
    6. Galinato, Gregmar I. & Yoder, Jonathan K., 2010. "An integrated tax-subsidy policy for carbon emission reduction," Resource and Energy Economics, Elsevier, vol. 32(3), pages 310-326, August.
    7. Mahlia, T.M.I. & Tohno, S. & Tezuka, T., 2013. "International experience on incentive program in support of fuel economy standards and labelling for motor vehicle: A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 18-33.
    8. Fischer, Carolyn, 2008. "Comparing flexibility mechanisms for fuel economy standards," Energy Policy, Elsevier, vol. 36(8), pages 3106-3114, August.
    9. Peters, Anja & Mueller, Michel G. & de Haan, Peter & Scholz, Roland W., 2008. "Feebates promoting energy-efficient cars: Design options to address more consumers and possible counteracting effects," Energy Policy, Elsevier, vol. 36(4), pages 1355-1365, April.
    10. Jaume Freire-Gonz lez & Ignasi Puig-Ventosa, 2015. "Energy Efficiency Policies and the Jevons Paradox," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 69-79.
    11. Chen, Anning, 2011. "Reliable GPS Integer Ambiguity Resolution," University of California Transportation Center, Working Papers qt9gs0t2f9, University of California Transportation Center.
    12. Martin, Elliott William, 2009. "New Vehicle Choice, Fuel Economy and Vehicle Incentives: An Analysis of Hybrid Tax Credits and the Gasoline Tax," University of California Transportation Center, Working Papers qt5gd206wv, University of California Transportation Center.
    13. Joerg Breitscheidel & Hans Gersbach, 2005. "Self-Financing Environmental Mechanisms," CESifo Working Paper Series 1528, CESifo.

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