May 24, 2007 A market-based incentive program to reduce global warming emissions from new cars and trucks would cut pollution as much as 33 percent and provide up to $2,500 in lifetime fuel savings for drivers, according to a new study by the University of Michigan's Transportation Research Institute (UMTRI).
The Clean Car Discount program creates a schedule of fees and rebates, collectively known as "feebates," based on the amount of global warming pollution different new vehicles produce.
"Our analysis shows that by harnessing the power of price signals, feebates spur consumers to purchase and manufacturers to produce cleaner vehicles," said Walter McManus, director of UMTRI's Automotive Analysis Division.
The study, "Economic Analysis of Feebates to Reduce Greenhouse Gas Emissions from Light Vehicles for California," uses the program design of The California Clean Car Discount Act (AB 493) introduced by state Assemblyman Ira Ruskin.
The bill directs the California Air Resources Board (CARB) to implement a self-financing program to provide one-time rebates for new passenger cars and trucks with low global warming pollution emissions, which are paid for by one-time point-of-purchase fees assessed on dirtier vehicles. Twenty-to-25 percent of cars and trucks, representing all vehicle types, must be included in a "zero band" that would not qualify for rebates or surcharges, according to the proposed legislation.
UMTRI's study examines the economic impact on consumers and manufacturers, as well as the resulting reductions in global warming emissions from the existing Pavley regulations and the feebates program by analyzing four alternative scenarios: 1) Pavley alone; 2) Feebates at $18 per gram of CO2-equivalent per mile; 3) Feebates at $36 per gram; and 4) Pavley plus feebates at $18 per gram. To determine the costs of reducing global warming pollution, McManus created cost curves using 39 emissions-reducing technology packages identified by CARB.
The study's findings include:
- California's Pavley regulation alone achieves 26.7 percent reductions in greenhouse gas (GHG) emissions.
- Pavley plus feebates at $18 per gram (of CO2 per mile) achieves 25 percent more reductions than Pavley alone.
- Retailers' revenues rise under all scenarios. Pavley plus feebates creates the greatest increase with retailers earning $55.7 billion in revenue, a $3.5 billion (6.7 percent) increase compared to base earnings.
- Feebates, in conjunction with Pavley or alone, boost sales of cleaner cars.
- Consumers save as much as $2,544 under all scenarios and all vehicle types over the lifetime of their vehicles from reduced operational and fuel costs.
"We concluded that a feebates program combined with California's Pavley law is a potent policy solution to reduce global warming emissions because everyone gains—the consumer, the retailer and the environment we share," McManus said.
In California, vehicles are responsible for nearly a third of the state's total greenhouse gas emissions. Currently, there are more than 20 million passenger vehicles on California roads, with the fleet expected to grow by 1.9 million new passenger cars and trucks a year.
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