Feebates: why all the fuss now?
I don’t understand the strong feelings stirred up by the Government’s proposed feebate scheme.
Sure, anyone could see there would be people opposed to the idea of cross-subsidising the purchase of EVs and other fuelefficient vehicles, although I’ll say upfront I’m not one of them.
Changing the kind of vehicles we drive appears one of the easiest ways to reduce carbon emissions, at least compared to stopping cows from farting.
And the car industry’s recent progress in encouraging people into more fuel-efficient vehicles without any kind of ‘‘carrot and stick’’ has been glacial.
The average carbon emissions of light vehicles imported into New Zealand inched down by just 2 grams per kilometre-travelled to 171g/km last year, according to the Transport Ministry.
At that rate, it would take New Zealand 33 years to drop to the average of 105g/km that Europe achieved last year.
The car industry could argue they are simply supplying the vehicles that consumers demand, but that’s disingenuous.
The volume of advertising that car manufacturers engage in speaks to their influence in shaping consumers’ aspirations.
Car-makers have helped price and promote utes and SUVs to dominance and done a generally feeble job of helping consumers understand the savings in fuel and maintenance they could make switching to EVs.
There may be a very small proportion of tradesmen for whom an electric van isn’t a viable option, and a few others for whom a petrol or diesel vehicle may remain the only option for perhaps a couple of years.
But viewing the fees they might pay under the feebate scheme as a ‘‘punishment’’ seems a skewed perspective.
Instead, why not look at them as a fair way for car buyers to still play their part in reducing carbon emissions even if they are unable to contribute directly to a greening of the fleet themselves?
Some politicians’ very worst nightmare with regard to climate change seems to be that New Zealand might do more than its fair share. But at the moment there is very little danger of that.
Anyway, that’s not really why I don’t understand the strength of opposition to the feebate scheme.
Rather, it is because at least the bulk of those cross-subsidies were going to happen anyway as a result of the Government’s Clean Car Standard, which will phase in an average emissions cap of 105g/km
for imported cars by 2025.
Car importers can choose to exceed the average 105g/km emissions target under that scheme, but only by paying a penalty or by buying a ‘‘credit’’ from another importer that manages to undershoot the target.
The Clean Car Standard announced by the Government in January would have led to car importers dropping the prices of EVs and upping the price of gasguzzlers anyway, with or without feebates. That’s Economics 101.
It would be worth importers dropping the price of EVs in order to get the credit, which would then allow them to sell a higheremission vehicle without paying a penalty.
Throwing the feebate scheme
on top of the Clean Car Standard simply means that most, if not all, of those cross-subsidies will happen through a slightly different, more transparent mechanism.
Consumers will claim rebates or pay fees, rather than those price changes going on behind the scenes in a process determined by ‘the market’ and managed by importers.
If importers had responded to a standalone Clean Car Standard by incurring penalties and spreading that cost across all cars including EVs, as some in the industry suggested they might, then there would have been an easy way to make millions.
Anyone would have been able to import EVs, undercut the importers who adopted the above strategy, and profit from on-selling the value of the credit they earned in undershooting the 105g/km target.
But with the mechanics of cross-subsidies now largely taken out of importers’ hands, it looks like they will be spared from making any big mispricing blunders, so there goes my multimillion-dollar idea.
All the above appears to have been fully understood by officials who considered Labour’s Clean Car Standard policy and the Greens’ Clean Car Discount sideby-side in 2018 and who assessed feebates as by far the lesser policy in terms of their likely impact on emissions.
That is presumably why Labour only went ahead with one of the policies when it won an outright majority in 2020.
Now, the revival of feebates throws a bone to the Greens that they can show off to those among their supporters who hadn’t realised that with adoption of the Clean Car Standard, they had already won.
That is not to say the feebate scheme is totally pointless though.
It starts to kick in immediately, whereas the Clean Car Standard will only start to take effect from 2023, and it sets out the exact shape of the cross-subsidies for different vehicles, making those completely predictable.