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Greene 17 (2:12)
Topic(s): Government
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Video Transcript

Well, feebates are an alternative to fuel economy standards that have some very positive attributes. Feebates get around this problem of the consumer not considering the, you know- fully considering the value of fuel savings, because the feebate comes at the time of purchase, so it's essentially like the price of the car and we know that people focus on the price of cars. And we know that manufacturers will focus on keeping those prices down so that if a manufacturer can add fuel economy technology, increase the fuel economy, and avoid a fee or gain a rebate, it's very likely that they will do that. So even though we have not tried feebates, there's every reason to think they would work as— work well as a substitute for fuel economy policy.

An advantage of feebates over fuel economy is that when you set out a fuel economy standard, as we set 27 1/2 miles per gallon in 1985, once the manufacturers meet that standard, they're done. There's no reason to keep going. And if new fuel economy technology comes along, they can use it to increase horsepower, they can not use it at all, but they don't need to use it to improve fuel economy.

On the other hand, with a feebate system, there's always a dollar to be gained, or a dollar of cost to be avoided, if a new fuel economy technology comes along that can either get you a rebate or avoid a fee. So there's a continuous incentive for the manufacturers to adopt fuel economy technology. I think that's the chief advantage of feebates. The chief disadvantage of feebates, from a real sense, is that they don't guarantee any level of fuel economy and therefore they don't guarantee any reduction in fuel consumption or greenhouse gas emissions. We have to see what the market does with them. I think they would work. But there's still that element of, you know, doubt that maybe they won't work as you might expect.