Feebates A Legislative Option to Encourage Continuous Improvements to Automobile Efficiency

The report proposes the feebate as a technology-neutral, self-financing policy to increase vehicle efficiency without restricting consumer choice. RMI recommends a constant rate per gallon of fuel saved and the use of size classes to ensure fair comparison between vehicles. Analysis of 2005 vehicle data suggests that the number of size classes has a more significant fiscal impact on manufacturers than the specific attribute used to define those classes. The document also examines the legal landscape, suggesting that state-level feebates may avoid federal preemption under CAFE standards, and critiques Canada's Vehicle Efficiency Incentive for using a 'step function' rather than a continuous one.

• A feebate is designed to be self-financing by using surcharges from inefficient vehicles to pay for rebates for efficient ones, ensuring taxpayers do not fund the policy.
• RMI recommends a constant rate for all vehicles to ensure that every gallon of fuel saved is valued equally, regardless of the vehicle's size or utility.
• To maintain revenue neutrality and encourage continuous innovation, the 'pivot point'—the benchmark dividing efficient and inefficient vehicles—must be adjusted regularly.
• Using multiple size classes prevents the policy from disproportionately impacting manufacturers of larger vehicles and preserves consumer choice by comparing like-sized vehicles.
• Static analysis of 2005 vehicle data indicates that the number of size classes has a more significant fiscal impact on manufacturers than the specific attribute (such as footprint or interior volume) used to divide those classes.
• Dividing size classes by equal sales volume is recommended over equal size range, as the latter can result in the largest vehicles having negligible surcharges.
• RMI argues that state-level feebates based on a gallons-per-mile metric should not be federally preempted by Corporate Average Fuel Economy (CAFE) standards because they provide incentives rather than mandates.
• The Canadian Vehicle Efficiency Incentive (VEI) is criticized for using a 'step function' rather than a continuous function, which creates financial discontinuities for vehicles near the threshold.
• Implementing feebates at the manufacturer level may be more administratively efficient than at the point-of-sale, though it may reduce consumer awareness of fuel savings.

APA

Mims, N., & Hauenstein, H. (2008). Feebates A Legislative Option to Encourage Continuous Improvements to Automobile Efficiency. RMI. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_Feebate_final.pdf

Chicago

Mims, Natalie, and Heidi Hauenstein. Feebates A Legislative Option to Encourage Continuous Improvements to Automobile Efficiency. RMI, 2008. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_Feebate_final.pdf.

Wikipedia

{{cite report |last1=Mims |first1=Natalie |last2=Hauenstein |first2=Heidi |title=Feebates A Legislative Option to Encourage Continuous Improvements to Automobile Efficiency |publisher=RMI |date=February 2008 |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_Feebate_final.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mims2008feebates, author = {Mims, Natalie and Hauenstein, Heidi}, title = {{Feebates A Legislative Option to Encourage Continuous Improvements to Automobile Efficiency}}, institution = {RMI}, year = {2008}, month = feb, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_Feebate_final.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }