Vehicle feebates should be considered

December 1, 2000

The response from the automobile industry to the provincial government's discussion paper on vehicle feebates was expectedly swift and critical. Indeed, vehicle feebates--taxing the purchase of vehicles with poor fuel efficiency and giving a rebate to those buying more fuel-efficient cars--and every other policy measure to address transportation's contribution to poor air quality and climate change has been vehemently opposed by this powerful lobby. However, I would urge people to take a good look at their objections and evaluate their validity.

One argument against feebates is that transportation is only responsible for 37% of carbon dioxide emissions. What about the other 63%? opponents ask. I agree. A multi-pronged approach is required in order to reduce emissions from all sources. But certainly that doesn't mean ignoring emissions from personal vehicles.

Another argument is that feebates penalize people who need trucks for work. Again, I agree. Equity needs to be considered when new policies are being considered. However, let's remember that many people who use vehicles for work can claim these expenses when filing tax returns. We should also investigate the possibility of excluding work trucks used by small business owners, as this would still tackle the majority of CO2 emissions from vehicles.

Another frequent argument is that people "need" trucks to transport their large families. I'm curious, what did people do in the 1970s, when families were bigger and SUVs and minivans were non-existent? The answer, of course, is they drove station wagons. According to the feebate system, there are station wagons that would come with a $500 rebate because they have fairly good fuel efficiency. And I know from experience that 5 campers and a weekend's worth of food and gear can fit into these; my friends and I do it all the time. Of course, the station wagon isn't as sexy as the mighty Explorer. (By the way, under this proposal, people could also buy a pick-up and get a rebate. The 4-cylinder truck just doesn't have the same pep, though, does it?)

Some have said this is just another tax grab, an underhanded way for government to collect more money from us. But the feebate, a form of environmental tax shifting, has been clearly designed to be revenue neutral. Individuals might pay more or less depending on how environmentally friendly their choices are, but government gains no net revenue from the plan.

One final argument is that the feebate system leads to worse air pollution because people will put off buying a vehicle and instead continue to use their older, more polluting car. In fact, just the opposite is true. Only people wanting to buy gas-guzzlers will delay that purchase. For anybody wanting a vehicle with average or better fuel efficiency, it will be either the same price or cheaper. Over time, these incentives will lead to a fleet that is newer, more fuel efficient, and less polluting. (Again, other problems that have to do with the personal automobile--especially our over-reliance on cars--must be dealt with through other approaches.)

So what does the auto industry propose for dealing with urban air pollution and climate change? Industry spokespersons do acknowledge that these problems exist. When pressed, though, the only solution they offer is "voluntary measures", which is industry-speak for "do nothing". They argue that people will decide, supposedly through moral persuasion (and despite a deluge of advertisement to the contrary), that they should purchase more environmentally friendly vehicles. However, the evidence refutes this. In spite of worsening urban air pollution and a better understanding of climate change, the public has opted, throughout the 1990s, for less and less fuel-efficient vehicles.

On the other hand, regulations do work, and people do react to financial incentives. It is no coincidence that, compared to 10 years ago, the vehicle fleet has both a worse fuel efficiency (which has not been regulated) and much better tailpipe emissions of regional air pollutants like hydrocarbons, nitrogen oxides, and sulfur oxides (which have been regulated). When the price of gasoline went up in the early and late 1970s, people adjusted by buying more fuel efficient cars.

Economic incentives and disincentives (one example being vehicle feebates) cannot be exclusively relied upon to solve all environmental problems. They can, however, be used to make our economy better reflect environmental realities. And they can be used in conjunction with regulations to produce a society that is both more sustainable and more equitable. The alternative to doing something now is allowing the social and environmental costs of automobile use to continue to climb. And we all pay that price.