To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates

56 Pages Posted: 17 Nov 2016

See all articles by Isis Durrmeyer

Isis Durrmeyer

University of Toulouse 1 - Toulouse School of Economics (TSE)

Mario Samano

HEC Montreal

Date Written: November 9, 2016

Abstract

We compare the welfare effects in equilibrium of two environmental regulations that aim at increasing the new cars fleet’s average fuel efficiency: the fuel economy standards and the feebate policies. Maintaining the same environmental benefit and tax revenue, we simulate the implementation of each policy in France and the United States. Standard-type policies have larger negative welfare effects, up to 3.2 times those from the feebate. Effects on manufacturers are heterogeneous: some are better off under the standard regulation. The addition of a market to trade levels of fuel efficiency dominates the simple standard regulation but not always the feebate. We also consider the attribute-based standard, technological improvements, and the equivalence with fuel taxes as extensions.

Keywords: Environmental Regulation, Automobile Market, Structural Model, Policy Simulations

JEL Classification: C51, Q51, L50

Suggested Citation

Durrmeyer, Isis and Samano, Mario, To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates (November 9, 2016). Available at SSRN: https://ssrn.com/abstract=2870917 or http://dx.doi.org/10.2139/ssrn.2870917

Isis Durrmeyer

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

21 allée de Brienne
Toulouse Cedex, F-31042
France

Mario Samano (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

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