Feebates as a fiscal measure for green transportation
Date Issued
January 2015
Author(s)
Abstract
Vehicle taxation based on CO2 emissions is increasingly being adopted worldwide to
shift consumer purchases to low-carbon cars, yet evidence on its effectiveness and
economic impact is limited. We focus on feebate schemes, which impose a fee on
high-carbon vehicles and give a rebate to low-carbon cars. We estimate demand for
passenger cars in Germany and simulate the impact of alternative feebate schemes
on emissions, consumer welfare, public revenues and firm profits. In this way we
quantify trade-offs between environmental effectiveness and fiscal and economic
impact of a market-based decarbonization policy. We find that revenue-neutral
feebate schemes are welfare decreasing; welfare can only increase with schemes
that increase tax revenues at the expense of consumer and producer surplus. After
presenting briefly the methodology and results of our work, this paper proceeds with
policy conclusions and presents directions for future research, both for improving
the scientific analysis of feebates and for linking the modeling work more closely to
the needs of policymakers – e.g. by simulating the short-and long-term response of
consumers to a continuously more stringent feebate scheme, assessing induced
technological progress by manufacturers and distributional aspects of these policies.
shift consumer purchases to low-carbon cars, yet evidence on its effectiveness and
economic impact is limited. We focus on feebate schemes, which impose a fee on
high-carbon vehicles and give a rebate to low-carbon cars. We estimate demand for
passenger cars in Germany and simulate the impact of alternative feebate schemes
on emissions, consumer welfare, public revenues and firm profits. In this way we
quantify trade-offs between environmental effectiveness and fiscal and economic
impact of a market-based decarbonization policy. We find that revenue-neutral
feebate schemes are welfare decreasing; welfare can only increase with schemes
that increase tax revenues at the expense of consumer and producer surplus. After
presenting briefly the methodology and results of our work, this paper proceeds with
policy conclusions and presents directions for future research, both for improving
the scientific analysis of feebates and for linking the modeling work more closely to
the needs of policymakers – e.g. by simulating the short-and long-term response of
consumers to a continuously more stringent feebate scheme, assessing induced
technological progress by manufacturers and distributional aspects of these policies.
Subjects
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