To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates?

Abstract

We compare the welfare effects in equilibrium of two environmental regulations that aim at increasing the new cars fleet’s average fuel efficiency: the fuel economy standards and the feebate policies. Maintaining the same environmental benefit and tax revenue, we simulate the implementation of each policy in France and the United States. Standard-type policies have larger negative welfare effects, up to 3.2 times those from the feebate. Effects on manufacturers are heterogeneous: some are better of under the standard regulation. The addition of a market to trade levels of fuel efficiency dominates the simple standard regulation but not always the feebate. We also consider the attribute-based standard, technological improvements, and the equivalence with fuel taxes as extensions.

Keywords

JEL codes

Replaced by

Isis Durrmeyer, and Mario Samano, “To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates?”, The Economic Journal, vol. 128, n. 616, December 2018, pp. 3076–3116.

Reference

Isis Durrmeyer, and Mario Samano, “To Rebate or Not to Rebate: Fuel Economy Standards vs. Feebates?”, TSE Working Paper, n. 16-732, November 2016, revised May 2017.