To Rebate or Not to Rebate: Fuel Economy Standards Versus Feebates

Isis Durrmeyer and Mario Samano

Economic Journal, 2018, vol. 128, issue 616, 3076-3116

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 each policy in France and the US. Standard‐type policies have larger negative welfare effects, up to 1.7 times those from the feebate. Effects on manufacturers are heterogeneous: some are better off under the feebate. A market to trade levels of fuel efficiency dominates the simple standard regulation and the feebate. We also consider the attribute‐based standard and technological improvements.

Date: 2018
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