3 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE

Development and Evaluation of Feebate Policies for California’s Effort to Limit Greenhouse Gas Emissions from Light-duty Vehicles

David S. Bunch, University of California-Davis, Phone: +1 530-752-2248, E-mail:

David L. Greene, Oak Ridge National Laboratories, Phone: +1 865-946-1310, E-mail:

Changzheng Liu Oak Ridge National Laboratories, Phone: +1 865-946-1306, E-mail:

Tim Lipman, University of California-Berkeley, Phone: +1 510-339-1449, E-mail:

Overview

California’s Global Warming Solutions Act of 2006 (AB 32) calls for the state’s greenhouse gas (GHG) emissions to return to 1990 levels by 2020. In December 2008 the California Air Resources Board approved a Scoping Plan for AB 32 that provides policy recommendations for achieving emission reduction targets in individual sectors of the California economy. To limit GHGs from light-duty vehicles, the plan calls for implementation of California’s own GHG standards for new vehicles sold in California. In addition, the plan specifies that feebate policies be evaluated as a possible complement to, or substitute for, California’s GHG standards. Feebates are market-based policies for encouraging emissions reductions from new passenger vehicles by levying fees on relatively high-emitting vehicles and providing rebates to lower-emitting vehicles. To satisfy this evaluation requirement, a team of researchers at the University of California conducted a comprehensive study to assess the potential design, implementation, and benefits of a feebate program for California. This paper provides an overview of the results of the study.

Methods

The research study was multi-faceted with multiple methods and approaches applied to various aspects of feebate policies. Methods include: case studies of existing feebate-related policies in other countries, quantitative modeling of market responses by manufacturers and consumers under alternative policy formulations, focus groups with California consumers, interviews with other stakeholder interviews (vehicle manufacturers, and automobile dealerships), and a large-scale survey of California households.

Results

Case studies indicate that feebates can have an immediate impact on behavior in the new vehicle market, changing the sales mix to those with lower GHG emissions.

Quantitative models yield insights into the likely impact of various feebate policies (e.g., a single benchmark for all vehicles, separate benchmarks for passenger cars and light-duty trucks, and footprint-based benchmarks for passenger cars and light-duty trucks) under alternative scenarios. Single benchmark programs yield the largest emissions reductions, but also the largest decrease in consumer surplus. We consider how feebate programs interact with national and/or state-level GHG regulations, and the role of geographical coverage on the impact of feebates. Although feebates can clearly have an impact on the sales-mix of new vehicles, prior studies have suggested that the impact on manufacturers’ vehicle design decisions could be of primary importance in reducing GHG emissions. However, these studies have typically considered feebates for the entire domestic market. We find that, because California comprises roughly 10% of this market, a California-only feebate policy has a much-diminshed impact on vehicle designs. The impact increases if geographical coverage increases. For example, if the 13 additional states that adopted California’s GHG standards also opt to adopt feebate programs in a similar fashion, this will have an increased impact on vehicle design decisions. Our results also show evidence of both spillover and leakage effects over time under a California-only policy.

The stakeholder response portion of the study involved a survey and focus groups of households as well as interviews with automobile manufacturers and automobile dealers, which yielded additional insights related to implementing a potential feebate program. The statewide survey of 3,000 households indicates that consumers are generally concerned about climate change and energy independence and that three-fourths of respondents would be supportive of a feebate program. However, program design would need to consider the issue of fairness raised in focus groups. Interviews with a sample of automakers representing 72 percent of US sales show they are more cautious in their support for feebates, the specific program design being a key determinant. Though in all cases, a national program would be favored over a state or regional program. Automobile dealers are generally opposed to feebate programs due to concerns about administrative burdens, potential revenue losses, and perceived reductions in consumer choice.

Conclusions

Our findings indicate that feebate policies could be used by the State of California to achieve additional reductions in GHG emissions beyond those being produced by vehicle emissions standards. However, the reductions are not strikingly large, and the decision of whether to implement a feebate program, and if so, which one, will require that policy makers make value judgments requiring a variety of potentially difficult tradeoffs.

References

Davis, W.B., M.D. Levine, K. Train and K.G. Duleep, 1995. “Effects of Feebates on Vehicle Fuel Economy, Carbon Dioxide Emissions, and Consumer Surplus”, DOE/PO-0031, Office of Policy, U.S. Department of Energy, Washington, D.C.

Greene, D.L., P.D. Patterson, M. Singh, and J. Li, 2005. “Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy”, Energy Policy, vol. 33, pp. 757-775

Greene, D.L., 2009. “Feebates, Footprints and Highway Safety”, vol. 14, pp. Transportation Research D, vol. 14, pp. 375-384, 2009.