Wednesday, April 07, 2004

Combinations of Policy Options

Ford made a case for a combination of gas tax and incentives to spur sales of more fuel efficient cars.

Bill Ford Jr. said he has supported a gas tax of 50 cents a gallon, but he preferred tax breaks for consumers who buy cars with new fuel-saving technology such as hybrids which are powered by gas engines and batteries to boost fuel economy.

"Even going back four or five years I used to say that I'd support a 50 cent gas tax," Ford said at the New York auto show. "I think that a combination of gas taxes and incentives would also be something we could support. But I don't know how high."

Ford is not sure. I am slightly more sure than Ford.

The trick is to combine measures so they work together. For example, one proposal is a "feebate" system in which customers pay an extra fee to buy big gas-guzzlers but get a rebate if they buy small, fuel-efficient models -- a measure that can be revenue-neutral. The feebate system combines well with stricter corporate average fleet economy (CAFE) standards. Auto manufacturers will be required to make smaller, more efficient cars -- and that's what their buyers will want. Adding higher fuel taxes to the package will both discourage additional driving and add further incentive for customers to buy fuel-efficient models. Tax credits elsewhere can offset the added fuel costs so vehicle users will feel no extra financial burden.

So. Mr. Ford will you back the following proposal?

* Increases in CAFE standards phased in over a 25 year period: 43 MPG for cars and 31 MPG for trucks by 2033
* Trading of CAFE credits permitted
* Modest level of Feebates introduced in the market (Fees for gas guzzlers, Rebates for gas sippers: Combine the current gas guzzler tax with the credits for hybrid/fuel cell vehicles. This can be made revenue neutral.)
* A gasoline tax increase phased in over a 25 year period at a rate of 5 to 10 Cents/gallon/year. Tax credits to make it revenue neutral.

I hope you will!


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