Feebates: A Complementary Strategy for Reducing GHG from Vehicles

May 2010

A team of University of California researchers, led by UC Davis with UC Berkeley and UC Irvine participants, has completed a comprehensive study of "feebates," delivering their Interim Statement of Findings to the California Air Resources Board (ARB), which contracted UC for the study. Feebates are a market-based policy for reducing emissions from passenger vehicles. A one-time fee is levied on relatively high-emitting vehicles when they are sold new. These funds are used to provide rebates for lower-emitting vehicles when they are sold new. As required in the scoping plan for the state's climate change law, AB 32, ARB undertook this comprehensive study to consider measures that could be used as alternatives or complements to direct regulation of greenhouse gas emissions from new passenger vehicles.

The research team developed manufacturer and consumer models with unprecedented level of detail, accounting for vehicle redesign schedules, differences in automakers' individual product offerings, California-specific consumer preferences, and concurrent performance-based light-duty vehicle GHG emissions standards. More than 50 distinct scenarios were developed. The UC Davis team led the modeling effort and the UC Berkeley team conducted consumer focus groups and a statewide survey.

Following are key findings:

  • Feebates can cost-effectively reduce fleet-average GHG emissions in California by 3% to 10% over and above reduction achieved through emissions standards. In 2020 this reduction could translate to 2% to 5% of the reductions needed to achieve the state's AB 32 target.
  • Under most scenarios, the benefits of the program pay for themselves and outweigh the costs, including costs associated with improvements in vehicle technology.
  • California would see even greater emissions reductions if other states were to opt in to California's program, increasing the coverage of the new vehicle market. A national feebate program would produce the greatest benefits.
  • The degree of emissions reduction depends on the specific design of a feebate program, the stringency of any concurrent emissions standard, and modeling assumptions for fuel prices, technology costs, and consumer preferences.
  • A telephone survey of 3,000 California households found that three-quarters of respondents would support a feebate-type program to slow the rate of climate change.

The UC Davis team was led by Graduate School of Management Professor David Bunch and ITS-Davis Visiting Researcher David Greene, a corporate fellow at Oak Ridge National Laboratory (ORNL). UC Davis Professors Chris Knittel and Yueyue Fan contributed to the study, along with UC Irvine Professor David Brownstone and consultant K. G. Duleep. ITS-Davis post-doctoral researcher Changzheng Liu, who also is affiliated with ORNL, and UC Davis graduate students Andy Lentz, Amine Mahmassani, and Omid Rouhani rounded out the UC Davis research team. The UC Berkeley team was led by Timothy Lipman and Susan Shaheen (who also holds an ITS-Davis research position).