Feebate

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"Feebate" is a portmanteau of "fee" and "rebate". In general, a feebate program is a (usually, self-financing) system of government imposed surcharges (fees) and refunds (rebates) that are used to shift market purchasing preferences toward an economically, socially or politically desired goal. Originally coined in the 1990s, feebate programs have typically has been used to shift buying habits in the transportation and energy sectors.

For example, California's proposed "Clean Car Discount" program (AB493-Ruskin)^[1] is designed to help reduce the state's global warming/greenhouse gas emissions by imposing a fee of up to $2,500 on new, high carbon emitting vehicles (starts with 2011 models), and then rebating the fee to buyers of new low emission vehicles.

Supporters point towards what they feel are 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.

Detractors view feebates as unnatural intrusion into the free market by the state that can have broad, unpredicted and undesirable consequences. There is no specific philosophy or formula for solving such conflicts as one man's sound public policy is another's unwise meddling.

However, supporters claim feebates are generally a more efficient way of promoting greater fuel efficiency and other socially-desirable outcomes than traditional taxes or quotas.^{[citation needed]} 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. Some might argue that the very high prices of gasoline have that same affect, but the politicians hands are tied when it comes to increasing traditional taxes....so here come feebates.

Supporters also claim feebates also are more efficient than quotas and standards such as CAFÉ.^{[citation needed]} 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.^{[citation needed]} Some might argue that a government could create marketing programs and incentives for rideshare, but as governments are so reliant on sales taxes from automobiles, there is no money for the government in carpool or rideshare. In a time when governments have increasing debt and spending, feebates allow the politicians to have new taxes without the traditional debate.

Another example of a feebate is proposed in the Rocky Mountain Institute’s 2004 publication, “Winning the Oil Endgame.”([1]) 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.