Feebates: a Legislative Option to Encourage Continuous Improvements to Automobile Efficiency

A feebate is an incentive policy that encourages the continuous improvement to automobile fuel economy and greenhouse gas emissions by providing incentives for manufacturers to build more efficient vehicles and rewarding consumers who purchase more efficient vehicles. The feebate concept is simple in concept: inefficient vehicles receive a surcharge (FEE-), and efficient vehicles are granted a rebate (–BATE). The fees on the inefficient vehicles pay for the rebates on the efficient vehicles. Thus, the feebate has the potential to accelerate the production and adoption of more efficient vehicles, ultimately reducing the United States’ transportation fossil fuel consumption. The purpose of this paper is to provide information about feebates by discussing: what a feebate is, why RMI believes a feebate is a valuable tool, recent analysis that RMI had done on feebates, what the current status of the feebate is, and how the feebate could interact with existing laws. RMI previously analyzed feebates in its 2004 publication Winning the Oil Endgame, which provides a roadmap for weaning the United States off of oil by the 2040s. Since then, RMI has collaborated with researchers, industry, and other no-governmental entities to determine what characteristics a feebate could have. Additionally, RMI built upon the 2004 analysis in this paper by conducting a static analysis on 2005 vehicle data to determine what impact certain attributes have on the feebate. Based on this collaboration and analysis, RMI has established recommendations for a fuel economy-based feebate that seeks to increase the efficiency of all vehicles, regardless of size.