New Vehicle Feebates

50 Pages Posted: 5 Sep 2014 Last revised: 18 Aug 2015

See all articles by Nicholas Rivers

Nicholas Rivers

University of Ottawa - Graduate School of Public and International Affairs

Brandon Schaufele

University of Western Ontario - Richard Ivey School of Business

Date Written: August 14, 2015

Abstract

New vehicle feebate programs encourage improved fleet-wide vehicle fuel efficiency; yet analyses of these policies have been limited to ad hoc proposals. In this paper, we exploit an extensive, multi-year dataset which includes more than 16 million observations to evaluate the welfare implications of a long-standing vehicle feebate program in the Canadian province of Ontario. We (1) show that second-best optimal feebates can be written as a function of new vehicle Pigouvian taxes; (2) find that Ontario’s feebate program was welfare-enhancing relative to a no feebate scenario but that a second-best optimal benchmark would have yielded additional welfare while reducing fleet-wide emissions; and (3) that Ontarian consumers responded asymmetrically to fees versus rebates.

Keywords: feebate, vehicle choice, environmental policy, externality, optimal tax

JEL Classification: D49, D62, H23, Q58, R48

Suggested Citation

Rivers, Nicholas and Schaufele, Brandon, New Vehicle Feebates (August 14, 2015). Available at SSRN: https://ssrn.com/abstract=2491552 or http://dx.doi.org/10.2139/ssrn.2491552

Nicholas Rivers

University of Ottawa - Graduate School of Public and International Affairs ( email )

75 Laurier Avenue East
Ottawa, Ontario K1N 6N5
Canada

Brandon Schaufele (Contact Author)

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

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