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Comparative Analysis of Fiscal Policies Associated With New Passenger Vehicle CO2 Emissions, and Implications for China
 

Comparative Analysis of Fiscal Policies Associated With New Passenger Vehicle CO2 Emissions, and Implications for China

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Presentation by ICCT researcher Hui He at the Vehicle Fuel Consumption Regulation and Fiscal Policy Workshop, Beijing, April 14-15

Presentation by ICCT researcher Hui He at the Vehicle Fuel Consumption Regulation and Fiscal Policy Workshop, Beijing, April 14-15

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    Comparative Analysis of Fiscal Policies Associated With New Passenger Vehicle CO2 Emissions, and Implications for China Comparative Analysis of Fiscal Policies Associated With New Passenger Vehicle CO2 Emissions, and Implications for China Presentation Transcript

    • Comparative Analysis of Fiscal PoliciesAssociated With New Passenger VehicleCO2 Emissions, and Implications for China! 车辆节 CO2减 财 较对 Vehicle Fuel Consumption Regulation and Fiscal Policy Workshop Beijing, April 14-15 Hui He 1
    • Examples of integrated approach around the world! 际 对车辆节 综 Vehicle Efficiency/GHG Complementary policies Other Standards Fuel 辅 innovative or Country/ 车辆 标 规 carbon local Region Light Standard Heavy Vehicle High measures Cars commerci trucks 碳 Labels Fiscal fuel tax al 创 车 标 标识 policies 轻 车 车辆财 车 European Low emission zones linked to Union ✓ ✓ ✓ ✓ ✓ ✓ CO2 emissions performance United Pay as you go States ✓ ✓ ✓ * ✓ ✓ ✓ insurance Japan ✓ ✓ ✓ ✓ ✓ ✓ China ✓ ✓ ✓ EV Zero emission require incentiv vehicle California aero ✓ ✓ ✓ ✓ es, purchase and tire hybrid mandates, trucks VMT target * Final rule to be released in July 2
    • Role of fiscal policies! 财 节 减   Encourage manufacturers to adopt technologies to improve   fuel efficiency and reduce emissions    Send consumers appropriate price signal to purchase fuel- efficient and low carbon vehicles  Support fuel efficiency and   emission regulatory targets –  Regulatory standards need to be   strengthened overtime –  Fiscal policies provide   continuous incentive to improve   –  Fiscal policies are easy to establish 3
    • Why fiscal policies - efficiency technologies cost! 为 么 财 节 术   US EPA’s OMEGA model used many   technology packages, 19 vehicle classes to evaluate scenarios    Increasing costs from incremental efficiency, to hybrid, and to electric technology $!!!" Baseline Subcompact car (1.5L 4V DOHC I4)! Electric-./0/.123"4/5673/"8967/"6."#!#*":9;0"#!!&" #!!!" EV150 Plug-in hybrids !!!!" <2=/36./">?#!!&@4/5A" PHEV40 Grid-charging EV100 PHEV20 &!!!" EV75 %!!!" Hybrid Gasoline Regenerative braking Motor-assist Optimization $!!!" efficiency Stop-start Aerodynamics Tires Advanced materials/designs Variable valve lift/lift Dual-clutch #!!!" Direct injection 6+ speed Turbocharging !" #!(" )!(" $!(" *!(" %!(" +!(" &!(" ,!(" !!(" 921/B"CD/3"E;.=D08F;.@GHG"/06==6;.="9/BD7F;.">:9;0"#!!&"<2=/36./A" Reduction from 2008 baseline car 4 Data source: US EPA joint agency Technology Assessment Report for the Notice of Intent of 2017-2025 light-duty vehicle standards
    • Evidence in China: New vehicles sales growth pattern changed dramatically during past few years due to various fiscal incentives! 过 车财 车销 长 变 ! !1" 1~1.6"1.6~2"2~2.5"2.5~3" 3~4" >4"   Economic downturn   Consumer expectation of significant increase of Excise tax for such vehicles in the near future 2007 ~ 08   经济   费 预 车 费   Economic downturn continued   Excise tax indexed by engine size – Sept 2008 2008 ~ 09   Halved Acquisition tax for 1.6L or below   经济   费 调 进 步 车 赋   1.6 购 减   Economy reviving led to growth among all sectors.   Favorable policies for small vehicles phasing out 2009 1st Half ~   经济复苏 车辆销 2010 1st Half   对 车 优 减 Data source: China Automotive Industry Yearbook 2010 5
    • The ICCT studies on world’s vehicle fiscal policies and feebate programs!ICCT对 轻 车财 奖惩 报 Available: http://www.theicct.org/tag/fiscal-policy/ 6
    • Scope: One time and annual tax on new cars in 8 leading auto markets 围 8 车 产 对 轻 车购买 阶 实 费 Attribute-Based CO 2-Related Nation Incidence Direct CO 2 Measures Targeted Incentives Measures One time First year registration tax — — United Kingdom Excise duty based on CO 2 Annual for regular cars and AFVs — — CO2 Tax credits for HEVs and One time Gas-guzzler tax United States — AFVs Bonus-malus (feebate) Registration tax based on fiscal One time based on CO 2 for regular horsepower, reduced rates on AFVs — cars and AFVs France CO2 Annual tax on high CO2 Annual cars — — Annual circulation tax Annual circulation tax component based Annual Exemption for BEVs Germany component based on CO 2 on engine size CO2 7
    • Scope: One time and annual tax on new cars in 8 leading auto markets 围 8 车 产 对 轻 车购买 阶 实 费 续 Attribute-Based CO 2-Related Nation Incidence Direct CO 2 Measures Targeted Incentives Measures One time Registration tax based on engine size Brazil — — Excise duty based on engine size One time China — Acquisition tax based on engine size — Excise tax based on vehicle classes Lower tax rate for HEVs and One time zero tax for BEVs India — Special duty based on engine size Acquisition tax based on engine size, Exemption for next- One time — reduced rates for special vehicles generation vehicles Tonnage tax based on weight, reduced Japan rates for special vehicles a Exemption for next- Annual b — Auto tax based on engine size, reduced generation vehicles rates for special vehicles and next- generation vehicles 8
    • Methodology in a snapshot 简   Analyze each country’s whole policy package   over the CO2 basis   Equivalent marginal CO2 rate describes the lifetime (12 yrs, 5% discount rate) price signal   given to each unit of CO2 increase from cars – US$/(gCO2/km)   Direct CO2/fuel economy measures : linear   regression of bin-based policy   Indirect measures: using statistical correlation to convert attribute-based policy components to CO2 basis equivalency $8,000! Equiv. CO2 Rate = 24.2(gCO2/km) - 6081.5! $6,000!Gas-guzzler tax in US$! $4,000! $2,000! $0! -$2,000! 0! 50! 100! 150! 200! 250! 300! 350! 400! 450! 500! 550! 600! gCO2/km (NEDC cycle)! 9
    • Comparison of Price Signal and Policy Design! 设计 较 Implied Price Signal Policy Policy If Applied If Incentive CO 2 -based US$/(gCO2/km) Structure Type Fleetwide Continuous Target Incen. Engine size Indirect Yes No No 53! Engine size, weight Indirect Yes Partial Partial 44! Direct Partial No Yes 41! CO 2 CO 2, Engine size Mixed Yes Yes Yes 36! CO2 Engine size, category Indirect Yes No Partial 33! CO 2, Horsepower Mixed Yes No Yes 29! CO2 CO 2, Engine size Mixed Yes Yes Yes 27! CO2 Fuel economy Direct No No Partial 24! 10
    • Comparison of overall policy efficiency! 较 98%! $10 ! 100%! 93%! 90%! 85%! Lifetime Equivalent CO2 Tax! 82%! $8 ! 80%! (thousand US$)!Policy Efficiency! $6 ! 65%! 60%! $4 ! 48%! $2 ! 40%! $- ! 100! 150! 200! 250! 300! 20%! gCO2/km (NEDC cycle)! 20%! 0%! R = 1! "| T ! T CO2 | y P! y D! UK ! an ! ce ! ina! dia! US ! "| T | p n an an Ja Fra Ch In rm rm Ge Ge •  The policy efficiency ratio measures the degree to which the current fiscal •  measures in general mimic a revenue- neutral, continuous CO2-based incentive. •  Illustrates the potential of each country •  to fully take advantage of its current fiscal policy scheme to encourage low CO2 emission vehicles. 11
    • Design Principles! 设计   Taxes and incentives should be directly linked to vehicle CO2   emissions or other linear fuel efficiency metrics.   The policy should apply to the   entire vehicle fleet, not a subset.  Benefits and penalties should be calculated continuously across   the spectrum of CO2 emissions, rather than in a stepwise or bin- based fashion.    Targeted incentives for alternative fuels or vehicles should be linked to vehicle CO2 performance. 12
    • Policies based on attribute cannot provide as effective incentive as CO2- based policies! 车辆 财 难达 CO2   Though engine size and other vehicle   attributes correlates to fuel consumption/CO2 currently, there’re significant variations    Introduction of future technologies will   further disconnect such relations  Shifting from attribute basis to fuel consumption/CO2 does not require dramatic change in overall revenue 13
    • China’s policies have improved in the past few years in correcting price signal for efficient vehicles! 车财 过 调 发挥 车辆节 ! =+&$%&("#)*+#$,-$$ L+#5,&(0*&$*+*5>M$ ./01"*$2%/7$5%1"*&$ "%81+>$"(6"1&M$-,5$ #%/$5%#*"$,+$9%5>*$ *N01*+#$%+&$O!CDE$ *+>1+*$8*4109*"$ *+>1+*$8*4109*"$ $ $ !"#$%&("#)*+#$,-$$ ?%98*&$ F*&(0*&$1+0*+B8*$ .+&*&$@0A(1"1B,+$ ./01"*$2%/$31#4$),5*$ @0A(1"1B,+$2%/$ G@0A(1"1B,+$#%/H$ 2%/$1+0*+B8*$-,5$ 61+"7$*+&*&$ -,5$!CDE$*+>1+*$ -,5$!CDE$*+>1+*$%+&$ !CDE$*+>1+*$%+&$ -%8,5%69*$#%/$,+$ %+&$6*9,3$ 6*9,3$ 6*9,3$ :;<"$ !CD !CD !CD $ $ ICJK$ $ $ 场 销 车 举Top selling sample models 2006 2007 2008 2009 2010 2011Car A: 1.5L QPPP$ "($)*$+,$-$6.5L/100km .*/#01$ =PPP$$12700 !PPP$ %234)5)67*$Car B: 2L P$ .(2)5/$8.7L/100km !"#$!"#$ !"#$!"#$ !"#$ !"#$ !"#$ !"#$ !"#$ !"#$ !"#$!"#$$13150 %$ &$ %$ &$ %$ &$ %$ &$ %$ &$ %$ &$Car C: 2L RJPP$ "($)*$+,$-$8.5L/100km$29250 =JPP$ %234)5)67*$SUV A: 2L .(2)5/$ JPP$9.9L/100km !"#$!$ ,+8$%$ ,+ $!$ %$$28670 8$ # !" 14
    • But, Compared to the displacement-based policies, setting incentives by fuel efficiency can further reward efficient vehicles! 车辆 车 发动 节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ngine displacement tax Fuel consumption tax 发动
    • More importantly, future efficiency technologies will further disconnect the traditional link between vehicle attributes and fuel efficiency! 车辆节 术 进 步 车辆 (CO2 关 车辆 为 节 术 应 U.S. adoption in Potential CO2 Technology or efficiency new 2008 fleet b Area reductiona mechanism for CO2 reduction 2008 国车队 减 潜 术 况 Variable valve timing or lift VVT 2-8% 53% Cylinder deactivation 断 3-6% 6% Turbocharging 涡轮 压 2-5% 2% Engine Gasoline direct injection 喷 术 8-15% 4% Powertrain 发动 Compression ignition diesel 压 15-40% 0.1% 传动 统 Digital valve actuation 5-10% 0% 6+ speed 6 变 3-5% 21% Transmission Continuously variable 变 4-6% 8% Dual-clutch, automated manual 双 变 4-8% 1% Aerodynamics 进 动 设计 5-8% - Tire rolling resistance 进轮 滚动 2-8% - More efficient auxiliaries (steering, air conditioning) 2-10% - 转 统 调 Vehicle Advanced materials (10-20%) 进 5-10% - Mass-reduction Integrated vehicle design (15-30%) 综 车 减 车 设计 进 10-20% - Hybrid systems Stop-start mild hybrid stop-start 5-10% <1% 动 Full hybrid electric system 动 20-50% 2% Electric-drive Plug-in capable electric vehicles 30-75% 0% 电动 Fuel cell vehicles 电 30-75% 0% a Many technologies can be combined, percents are approximate but not strictly additive; from US 16 EPA, 2010 b From US EPA, 2009 “Trends” report
    • Policies only covering partial segments of fleet cannot realize full potential of reducing emissions from all vehicles ! 车队 实现 车队 减 17
    • Non-continuous policies provide no Incentive within a bin and create “corner effect”! 每 导 “ 应”! $6,000 ! $5,000 ! A B Lifetime CO2 tax in US$! $4,000 ! $3,000 ! $2,000 ! $1,000 ! $- ! 50! 100! 150! 200! 250! 300! 350! gCO2/km (NEDC cycle)! As shown in the above example, as vehicle CO2 emission increases from A to B, incentive does not change. 18
    • Targeted Incentives Linked Partially to CO2 May Provide Mixed Price Signal ! 针对 进 术车辆 CO2 钩 导 节 减 确 $4,500! $3,600! Escape Hybrid! Tax Credits in US$! $2,700! Sierra Hybrid! $1,800! Civic Hybrid! $900! Aura Hybrid! $0! 100! 140! 180! 220! 260! 300! g CO2/km (NEDC cycle)! Data source: IRS, www.fueleconomy.gov 19
    • Findings and Recommendations! 结论 议  Countries are increasingly using direct   CO2-based fiscal policies to help achieve vehicle CO2 standards  Both stringency and design structure   determine the potential effectiveness of fiscal policies  We provided a set of recommended design principles including shifting   from attribute taxes to CO2 based incentives –  Attribute taxes cannot serve effectively as CO2 reduction incentives   –  Future efficiency technologies will further disconnect the traditional relations between   vehicle attributes and CO2   Such reforms do not require significant   change in the revenue stream. 20
    • For China’s consideration 问题  An integrated approach to   reduce fuel consumption?  Shift to fuel consumption   based, even CO2 based?  Combine fees and rebates   into a full-scale feebate system?  Disconnect from vehicle price, ince new   technologies cost? 21
    • Thank you!! 谢谢! !www.theicct.org! hui@theicct.org 22