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https://nap.nationalacademies.org/catalog/27432/critical-issues-in-transportation-for-2024-and-beyond

Reactions to Feebate Systems and Their Impact on Emissions

Meeting the climate targets set by the European Union for transport sectors requires an acceleration in the renewal of vehicle fleets to reduce average emissions. Governments around Europe and other regions have adopted feebate systems to promote the sale of more efficient vehicles. However, predicting consumer reactions to these policies has been challenging. This results in difficulties in fine-tuning feebates to specific goals as well as risks to public finances. Making realistic forecasts of responses to feebates is challenging because of the lack of literature on relevant elasticities. This is due to the more basic difficulty in aggregating responses to vehicle price variations. Responses may include shifting to zero-emission vehicles, smaller vehicles or more efficient vehicles of similar size as well as car manufacturers offering more models with advanced efficiency technologies. The author proposes that this variety of responses can be aggregated using the change in official CO₂ emissions of newly registered cars. This can then be set against the average price differentiation. Using data from the early French experience with a feebate system, the author calculated an elasticity of -3.3. This means that an average differentiation of prices by 1% results in an encouragingly strong reduction of average CO₂ emissions of new cars by 3.3%. As the data this elasticity is based on does not include a significant shift to zero-emission vehicles (given the lack of availability at the time) the author extended the analysis using ASTRA-Germany, a systems dynamics model developed over the last 20 years to forecast economic and transport developments. Using this model, the author simulates a number of variations of feebate systems, including simple incentive structures with only one feebate rate per gram CO₂ as well as more diverse systems, with two cutoff points as well as different rates per gram above and below the cutoff points. Preliminary results suggest an overall elasticity of around -5, combining elasticities from the French feebate experience with increased sale of electric vehicles in the model. Reactions to feebate systems in the model, and therefore elasticities, do vary across different versions of feebate systems. Increasing the feebate rate per gram CO₂ yields a stronger response in average CO2 emissions than adopting a lower cutoff point, with the elasticity of the latter version at -4.5. More complex systems with two cutoff points (with no feebate applying between them) and different rates per g CO₂ above and below these cutoff points allow for much more deliberate fine-tuning of price changes and yield much stronger reactions. While the simple versions of a feebate reduce average emissions of newly registered cars to between 74 and 79 g CO₂/ km, a more complex version with similar price variation pushed the average below 60 g CO₂/ km. Some questions for further research remain. Strong results of more complex feebate systems have to be weighed against behavioural constraints. Given the increased complexity, incentives across various types of cars may not be easily and immediately comprehensible to many consumers. Therefore, they may not optimise their purchase decisions to the extent the model suggests. Social aspects also have to be considered, in particular the impact on the affordability of cars. The most vulnerable groups are only indirectly affected, as they usually buy second-hand cars. On the other hand, an ambitious feebate system can contribute to zero-emission vehicles and very efficient vehicles becoming more affordable in the medium to long term. This can increase resilience and flexibility to react to other important emissions-reducing reforms, such as a fuel tax increase.

Language

  • English

Media Info

  • Media Type: Digital/other
  • Pagination: 10p
  • Monograph Title: European Transport Conference 2019

Subject/Index Terms

Filing Info

  • Accession Number: 01751292
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Sep 1 2020 4:00PM