Feebate
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A feebate is a transportation finance initiative imposed by government that charges users of socially undesirable items (e.g. gas-guzzling vehicles) and puts the money towards payments for users of socially desirable items (e.g. hybrid cars).
Supporters point towards feebates' tendency to promote socially-desirable aims by having users pay for the externalities that they incur upon society. In the case of personal cars, feebates share some of the same aims as fuel taxes, vehicle registration fees, congestion charging, and road pricing.
However, feebates are generally a more efficient way of promoting greater fuel efficiency and other socially-desirable outcomes than traditional taxes or quotas. Fuel taxes create important price signals that can make consumers aware of the non-internalized costs of fuel consumption (greenhouse gasses, other pollution). and raise funds to offset this externality. But retail consumers have very high discount rates, meaning buyers do not take into account the additional cost high gasoline taxes or poor gas mileage when purchasing a car. A feebate internalizes that cost into the initial purchase price.
Feebates also are more efficient than quotas and standards such as CAFÉ. Standards have effectively improved the efficiency and performance in a wide variety of products, including passenger vehicles. But feebates are a more economically efficient, promote even better performance (as opposed to just beating standards), and are less “gamable” or dependent on politics.
One example of a feebate is proposed in the Rocky Mountain Institute’s 2004 publication, “Winning the Oil Endgame.”([link]) For each class of car and light truck, a feebate mechanism is used to reward buyers of vehicles that are more fuel efficient than the average vehicle in that class and penalize buyers of less fuel efficient vehicles. This feebate is revenue-neutral, meaning that the amount of money collected through fees (surcharges) equals the amount paid out in rebates.
See also
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