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California Feebate: Revenue Neutral Approach to Support Transition Towards More Energy Efficient Vehicles

UCD-ITS-RR-17-18

Research Report

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Suggested Citation:
Jenn, Alan and Daniel Sperling (2017) California Feebate: Revenue Neutral Approach to Support Transition Towards More Energy Efficient Vehicles. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-17-18

Feebates are a policy mechanism that charges a fee to buyers of “gas guzzlers” and provides rebates to buyers of fuel efficient and electric vehicles. We analyzed historic vehicle sales in California and explored possible feebate designs.

The policy is designed to be revenue neutral, with no cost to taxpayers. This is achieved by redistributing the collected fees as rebates: for every dollar that is collected as a fee, a dollar is returned as a rebate (with a very small administrative charge used to pay for handling costs). A feebate structure as shown in Table 1 would yield a total of $500 million in rebates in 2015 for the top 15% most fuel efficient vehicles, paid for by the worst 15% gas guzzlers. An important point to note is that the feebate only applies to 30% of the fleet, half of which receive a rebate while the other half pay a fee. The remaining 70% of vehicle purchases are unaffected by the feebate program.

To avoid penalizing sellers and buyers of light trucks (SUVs, etc), the feebate is separated into two categories: cars and light trucks. In this way, the feebate does not simply shift from large trucks into small cars. Instead, trucks, vans, and SUVs have their own feebate rules which will charge a fee for the worst trucks, vans, and SUVs but also provide a rebate for the most efficient vehicles in this class. The dual feebate structure will prevent any funds from trucks going towards light-duty cars and vice versa. This provides a level playing field for all automakers.

A Research Report from the University of California Institute of Transportation Studies