0
Fiscal instruments:
incentives for auto fuel
economy improvement !
Vicente Franco, Peter Mock, Joshua Miller!
Improving fu...
2	

Some model projections for Russia…!
Transport model projections for Russia!
Projected FC of Russian LDV fleet

source: ICCT Roadmap model!
Adopted = no significant changes to the efficiency of the curr...
Projected FC of Russian HDV fleet

source: ICCT Roadmap model!
Adopted = no significant changes to the efficiency of the curr...
6	

Designing fiscal incentives for FE !
Comprehensive approach should treat vehicles
and fuels as a system
§  Reducing fuel consumption
§  Policy instruments in...
Design Elements For Effective Incentives!
§  Base fiscal charges directly on vehicle fuel consumption
levels, instead of v...
Key types of financial approaches to
reduce emission levels from road vehicles!
vehicle tax
registration tax annual tax
tax...
Key types of financial approaches to
reduce emission levels from road vehicles!
vehicle tax
registration tax annual tax
tax...
EU CO2 regulation shows positive effect ...!
80!
100!
120!
140!
160!
180!
2001! 2006! 2011! 2016!
2020 – 95g
2015 – 130g
g...
… but there are significant 

differences between member states.!
80!
100!
120!
140!
160!
180!
2001! 2006! 2011! 2016!
g/km...
Vehicle tax in Netherlands shows strong
effect on vehicle registrations!
Some countries are using incentives to
transition to low-carbon vehicles!
Market share of electric cars in comparison to t...
Key types of financial approaches to
reduce emission levels from road vehicles!
vehicle tax
registration tax annual tax
tax...
Illustration of a ‘feebate’ scheme!
Slide 16
Example of Feebate: French Bonus Malus (2008)
17	

-! 6,000"
-! 4,000"
-! 2,000"
! 0"
! 2,000"
! 4,000"
0" 50" 100" 150" 2...
French feebate system led to significant drop
in CO2 emissions!
Source: Les véhicules particuliers en France (Ademe), March...
Flaws in the French feebate system!
Source: Cuenot, F. (2009), CO2 emissions from new cars and vehicle
weight in Europe; H...
How to design a feebate system?!
$!
g/km CO2!0!
FEE!
REBATE!
slope determines marginal costs and benefits!
pivot point can ...
Feebates: large Impact on manufacturers!
§  Very efficient incentive to implement FE
technology!
§  Manufacturers will in...
Important to have a continuous slope, 

no steps!
$0!
Fuel Consumption – liters/100 km!
Rebate!
Fee!
$1,000!
6.5!
• Toyota...
Feebate vs. fuel economy regulation?!
vehicle regulation
“PUSH”
manufacturers
vehicle taxation
“PULL”
customers
provides c...
Pivot Point Doesn’t Matter for Technology!
7.8 L midpoint 8.2 L midpoint
CO2Emissions
Midpoint Baseline + 4% FE
Vehicle & ...
Feebates: Overview!
§  Customers are risk averse and severely
discount future fuel savings – fix is standards
or feebates!...
Chile Proposal to use feebates to Promote Cleaner Vehicles!
Emission of NOx! Type of Vehicle! Incentive! Disincentive!
NOx...
GFEI Feebate Tool Development!
§  Setting vehicle standards requires a high level of knowledge
and expertise on technolog...
Key types of financial approaches to
reduce emission levels from road vehicles!
vehicle tax
registration tax annual tax
tax...
Today, at least 16 countries have some form of CO2
or fuel efficiency tax on light-duty vehicles!
§  New vehicle purchase ...
Example of a Linear Design: German CO2 Tax!
30	

Annual CO2 tax component linear at €2 for each marginal increase of
gCO2/...
Key types of financial approaches to
reduce emission levels from road vehicles!
vehicle tax
registration tax annual tax
tax...
Fuel taxes in EU led to higher diesel
share in some member states!
Lower tax for ethanol led to more ethanol
vehicles in Sweden!
Lower natural gas tax led to more gas
vehicles in Italy!
Market shares of technologies 

reflect differences in tax regimes!
36	

Some final thoughts..!
37	

Role of fiscal policies in promoting fuel efficiency
§  Encourage manufacturers to adopt technologies to
improve fuel e...
Vicente Franco
+49 30.847.129.109
vicente@theicct.org
§  ICCT Passenger Vehicles website:
http://www.theicct.org/passenge...
Thank you

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Vicente Franco, Peter Mock, Joshua Miller!
Improving fuel economy and reduction of
emissions from road transp...
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Fiscal instruments: incentives for auto fuel economy improvement.Vicente Franco, Peter Mock, Joshua Miller.

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Improving fuel economy and reduction of
emissions from road transport in Russia
17-18 June 2014, Moscow!

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Transcript of "Fiscal instruments: incentives for auto fuel economy improvement.Vicente Franco, Peter Mock, Joshua Miller."

  1. 1. Fiscal instruments: incentives for auto fuel economy improvement ! Vicente Franco, Peter Mock, Joshua Miller! Improving fuel economy and reduction of emissions from road transport in Russia! 17-18 June 2014, Moscow!
  2. 2. 2 Some model projections for Russia…!
  3. 3. Transport model projections for Russia!
  4. 4. Projected FC of Russian LDV fleet
 source: ICCT Roadmap model! Adopted = no significant changes to the efficiency of the current fleet! GFEI target = standards cut average fuel consumption of new LDVs 50% by 2030, resulting in a LDV fleet that consumes 50% less fuel per vehicle-km by 2050.! 2.1!2.1! 0.4! 1.1! 0.0! 0.5! 1.0! 1.5! 2.0! 2.5! 2005! 2010! 2015! 2020! 2025! 2030! 2035! 2040! 2045! 2050! fuelconsumption! [millionbarrelsofoilperday]! Adopted! GFEI Target!
  5. 5. Projected FC of Russian HDV fleet
 source: ICCT Roadmap model! Adopted = no significant changes to the efficiency of the current fleet! Technical potential = standards reduce the average fuel consumption of new HDVs by 3.5% per year from 2020-2030, and 1% per year from 2030-2050.! 0.69! 0.42! 0.00! 0.10! 0.20! 0.30! 0.40! 0.50! 0.60! 0.70! 0.80! 2005! 2010! 2015! 2020! 2025! 2030! 2035! 2040! 2045! 2050! fuelconsumption! [millionbarrelsofoilperday]! Adopted! Technical Potential!
  6. 6. 6 Designing fiscal incentives for FE !
  7. 7. Comprehensive approach should treat vehicles and fuels as a system §  Reducing fuel consumption §  Policy instruments include fuel economy standards, feebate schemes, etc. §  Reducing criteria air pollutants §  Policy instruments include new vehicle emission standards (Euro V/VI and/or US Tier II/III), and in-use emission control strategies §  Improving fuel quality §  Reducing carbon content of fuels §  Reducing sulfur content of fuels to near zero levels (<10 ppm) Slide 7
  8. 8. Design Elements For Effective Incentives! §  Base fiscal charges directly on vehicle fuel consumption levels, instead of vehicle physical attribute, avoid fixed charges §  Mandatory labeling for fuel consumption is an enabler §  Apply the incentive widely across fleet, instead of limiting to a portion of the fleet §  Provide continuous incentive on every fuel consumption or fuel consumption level §  Targeted incentive programs should also be linked to fuel consumption §  A targeted incentive program refers to incentive provided to vehicles with special features (such as a certain fuel type, or vehicles equipped with certain technologies) 8
  9. 9. Key types of financial approaches to reduce emission levels from road vehicles! vehicle tax registration tax annual tax tax feebate tax feebate fuel tax financial approaches
  10. 10. Key types of financial approaches to reduce emission levels from road vehicles! vehicle tax registration tax annual tax tax feebate tax feebate fuel tax financial approaches
  11. 11. EU CO2 regulation shows positive effect ...! 80! 100! 120! 140! 160! 180! 2001! 2006! 2011! 2016! 2020 – 95g 2015 – 130g g/km CO2 2011 2011 2020 2001
  12. 12. … but there are significant 
 differences between member states.! 80! 100! 120! 140! 160! 180! 2001! 2006! 2011! 2016! g/km CO2 2011 2011 2020 2001 Netherlands switched to CO2 bases vehicle tax!
  13. 13. Vehicle tax in Netherlands shows strong effect on vehicle registrations!
  14. 14. Some countries are using incentives to transition to low-carbon vehicles! Market share of electric cars in comparison to total sales in 2012/13! 14
  15. 15. Key types of financial approaches to reduce emission levels from road vehicles! vehicle tax registration tax annual tax tax feebate tax feebate fuel tax financial approaches
  16. 16. Illustration of a ‘feebate’ scheme! Slide 16
  17. 17. Example of Feebate: French Bonus Malus (2008) 17 -! 6,000" -! 4,000" -! 2,000" ! 0" ! 2,000" ! 4,000" 0" 50" 100" 150" 200" 250" 300" 350" CO2 Emission (g/km)" Vehicles receive rebates! Vehicles subject to fees "
  18. 18. French feebate system led to significant drop in CO2 emissions! Source: Les véhicules particuliers en France (Ademe), March 2011! § 2001–2007 avg. reduction new vehicle CO2 = 1 g/km per year! § 2008: emissions drop 9 g/km and 2009 by 7 g/km, Ministry of Transport attributes to introduction of bonus/malus system!
  19. 19. Flaws in the French feebate system! Source: Cuenot, F. (2009), CO2 emissions from new cars and vehicle weight in Europe; How the EU regulation could have been avoided and how to reach it?, Energy Policy! §  French feebate system not ideal, leads to:! §  Approx. 300 Mio. € per year direct costs! §  Additionally about 300 Mio. € decline in VAT revenues, due to higher sales of smaller and cheaper cars.!
  20. 20. How to design a feebate system?! $! g/km CO2!0! FEE! REBATE! slope determines marginal costs and benefits! pivot point can be designed to meet revenue goals!
  21. 21. Feebates: large Impact on manufacturers! §  Very efficient incentive to implement FE technology! §  Manufacturers will install all technology that costs less than the fixed change in the CO2 incentive! §  Reduces the overall cost of producing the vehicle ! §  Increases mpg, which has some value to customers! §  DOE modeling (1995 & 2005) found about 90% of the impact was due to manufacturer response!
  22. 22. Important to have a continuous slope, 
 no steps! $0! Fuel Consumption – liters/100 km! Rebate! Fee! $1,000! 6.5! • Toyota Yaris – 6.4 l/100km! • Sales +49%! • Honda Fit – 6.6 l/100km! • Sales +3%! example: Canada!
  23. 23. Feebate vs. fuel economy regulation?! vehicle regulation “PUSH” manufacturers vehicle taxation “PULL” customers provides certainty of fuel consumption decrease! provides certainty of cost effectiveness!
  24. 24. Pivot Point Doesn’t Matter for Technology! 7.8 L midpoint 8.2 L midpoint CO2Emissions Midpoint Baseline + 4% FE Vehicle & emissions! •  Baseline efficiency – 8 L/100km! •  In-use FE shortfall – 15%! •  Lifetime travel – 240,000 km! •  Lifetime CO2 emissions – 58.7 tons! [5.2 # CO2 per Liter of gasoline]! Add technology! •  Improve FE by 4% @ $150 cost! •  Feebate valued at $100/ton CO2! •  $27.27 / ton C! •  About $1 / gallon gasoline! •  About $0.26 / liter gasoline! 0! 0! ($147)! $79! $147! $373!
  25. 25. Feebates: Overview! §  Customers are risk averse and severely discount future fuel savings – fix is standards or feebates! §  Feebates are far easier to implement than standards! §  Rate can be set without knowledge of vehicle technology! §  The pivot point needs to be changed periodically and the fees must be collected and the rebates distributed ! §  Feebates should be more acceptable than standards for manufacturers, as the cost is known !
  26. 26. Chile Proposal to use feebates to Promote Cleaner Vehicles! Emission of NOx! Type of Vehicle! Incentive! Disincentive! NOx < 0.02! Electric/Fuel Cell, some hybrids! $1000! --! 0.02 < NOx < 0.1! Euro 5/6 gasoline! Euro 6 diesel! $500! --! 0.1 < NOx < 0.2! Euro 4 gasoline! Euro 5 diesel! 0! 0! 0.2 < NOx < 0.3! Euro 3 gasoline! Euro 4 diesel! 0! $500! 0.3 < NOx < 0.5! Euro 2 gasoline! Euro 3 diesel! 0! $1000! 0.5 < NOx < 0.8! Euro 2 diesel! 0! $1500! Slide 26 Ø  Source: Centro Mario Molina, 2011!
  27. 27. GFEI Feebate Tool Development! §  Setting vehicle standards requires a high level of knowledge and expertise on technology, vehicles, cost, benefits, and lead time.! §  Feebates offer most of the benefits of vehicle standards and can be effectively implemented at less cost and with a much lower level of knowledge and expertise. ! §  UNEP/ICCT have awarded a contract to develop a simple to use feebate tool for use by governments to create financial incentives. The tool is specifically aimed at developing countries and countries in transition, and is targeted for use by ministries of finance.!
  28. 28. Key types of financial approaches to reduce emission levels from road vehicles! vehicle tax registration tax annual tax tax feebate tax feebate fuel tax financial approaches
  29. 29. Today, at least 16 countries have some form of CO2 or fuel efficiency tax on light-duty vehicles! §  New vehicle purchase or registration:! §  Austria, Canada, Finland, France, Ireland, Netherlands, Norway, Portugal, Spain, U.S.A.! §  Annual or recurring registration fee:! §  Denmark, Germany, Ireland, Luxembourg, Portugal, Sweden, UK! §  Sources: N.A. Braathen, 2010. “Incentives for CO2 Emission Reductions in Current Motor Vehicle Taxes”, ENV/EPOC/WPNEP/T(2009)2/FINAL, Environment Directorate, OECD, Paris.! §  H. He and A. Bandivadekar, 2011. “A Review and Comparative Analysis of Fiscal Policies Associated with New Passenger Vehicle CO2 Emissions”, ICCT, February.!
  30. 30. Example of a Linear Design: German CO2 Tax! 30 Annual CO2 tax component linear at €2 for each marginal increase of gCO2/km starting at 120 g/km per car in 2009. The threshold will be strengthened overtime. The continuous linear structure provides incentive for lowering CO2 emission at every level. ($500)! $0 ! $500 ! $1,000 ! $1,500 ! $2,000 ! $2,500 ! $3,000 ! $3,500 ! $4,000 ! 80! 100! 120! 140! 160! 180! 200! LifetimeCO2Tax(US$)! From 2014! From 2012! Current! 95g/km! 110g/km! 120g/km!
  31. 31. Key types of financial approaches to reduce emission levels from road vehicles! vehicle tax registration tax annual tax tax feebate tax feebate fuel tax financial approaches
  32. 32. Fuel taxes in EU led to higher diesel share in some member states!
  33. 33. Lower tax for ethanol led to more ethanol vehicles in Sweden!
  34. 34. Lower natural gas tax led to more gas vehicles in Italy!
  35. 35. Market shares of technologies 
 reflect differences in tax regimes!
  36. 36. 36 Some final thoughts..!
  37. 37. 37 Role of fiscal policies in promoting fuel efficiency §  Encourage manufacturers to adopt technologies to improve fuel efficiency and reduce emissions §  Send consumers appropriate price signals to purchase fuel-efficient and low carbon vehicles §  Support fuel efficiency and emission regulatory targets §  Regulatory standards set the minimum requirement and need to be strengthened overtime §  Fiscal policies provide continuous incentive to improve §  Easy to establish, does not require detailed knowledge of vehicles and technology costs, only needs to establish “rate, or value of fuel or GHG savings”, “revenue target”, and “test method and enforcement”
  38. 38. Vicente Franco +49 30.847.129.109 vicente@theicct.org §  ICCT Passenger Vehicles website: http://www.theicct.org/passenger-vehicles ! §  ICCT Staff blog: http://www.theicct.org/blogs/staff! §  Global Passenger Vehicle Standards Update: http://www.theicct.org/global-passenger-vehicle-standards-update ! §  US CAFE Standards: http://www.theicct.org/policies/us-cafe-standards ! §  EU LDV CO2 Regulation: http://www.theicct.org/policies/eu-light-duty-vehicle-co2-regulation ! §  Review and Comparative Analysis of Fiscal Policies to promote fuel economy: http://www.theicct.org/review-and-comparative-analysis-fiscal-policies ! §  CO2 Standards: http://www.theicct.org/issues/co2-standards ! More information …!
  39. 39. Thank you
 ! Vicente Franco, Peter Mock, Joshua Miller! Improving fuel economy and reduction of emissions from road transport in Russia! 17-18 June 2014, Moscow! спасибо
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