Vehicle Efficiency Initiative

The Vehicle Efficiency Incentive (VEI) was introduced in the 2007 Canadian federal government budget, aimed at promoting fuel efficient vehicles. The VEI took effect on 2007-3-20 and included a performance-based rebate program offering up to $2,000 for the purchase of a new fuel-efficient vehicle, a neutral treatment of a broad range of vehicles with average fuel efficiency that are widely purchased by Canadians, and a new Green Levy on fuel-inefficient vehicles.

The rebate program, eventually called ecoAUTO Rebate Program, initially offers $1,000 for new automobiles with a combined fuel consumption rating of 6.5 L/100 km (43.5 mpg) or better and minivans, sport utility vehicles (SUVs) and other light trucks with fuel consumption of 8.3 L/100 km (34 mpg) or better, calculated based on a combined 55 per cent city and 45 per cent highway rating. An addition $500 is offered for each half litre per 100 km improvement in the combined fuel-efficiency rating of the vehicle below these thresholds, for the maximum total of $2,000. The ecoAUTO rebate program applies to 2006, 2007 and 2008 model-year vehicles purchased or leased (12 months or more) between March 20, 2007 and December 31, 2008. All applications must be received by March 31, 2009.

Green Levy is charged for new passenger vehicles (excluding trucks) with fuel-efficiency ratings of 13.0 L/100 km (21.7 mpg) or worse, the incentive structure will include a new Green Levy on these vehicles, payable by the manufacturer or importer when vehicles are delivered into the Canadian market. The fuel-efficiency rating is calculated based on the same criteria as the rebate program. Green Levy will start at $1,000 for passenger vehicles with combined fuel-efficiency ratings of at between 13.0 L/100 km and 14.0 L/100 km (20.2 mpg), and increase in $1,000 increments for each full litre per 100 km increase in the combined fuel-efficiency rating above the 13.0 L/100 km floor, to a maximum of $4,000, for vehicles with ratings of 16.0 L/100 km (17.7 mpg) or worse.

In addition to the incentives and levies, Budget 2007 provided $6 million over the next two years for a seven-fold increase in current annual federal support delivered through Environment Canada for scrappage programs, and $30 million over the next two years for incentives to be designed by Environment Canada and Transport Canada in consultation with stakeholders that will remove older, high-emitting vehicles from Canadian roads.

Criticisms

According to auto industry analyst Dennis DesRosiers, large SUV buyers have reacted to VEI by buying pickups, which are exempted from the extra tax. [ [http://www.thestar.com/Business/article/247483 The Star.com] ]

A study by the C.D. Howe Institute questioned the effectiveness of the program. Specifically, the study claimed the program did not affect the majority of vehicles, the government failed to adequately consult the industry and did not phase in the policy, hurting the market share of the Big Three North American automakers, and was ineffective in reducing greenhouse gases. [ [http://www.cbc.ca/money/story/2007/11/22/feebate.html Federal auto 'feebate' program is flawed, study says] ]

Financial costs

For the ecoAUTO program, Canadian Fedaral government allocated $160 million over 2 fiscal years beginning in 2007. [ [http://www.auto123.com/en/news/green-wheels/the-2007-budget-incentives-for-car-drivers?artid=78936&pg=1 The 2007 Budget: Incentives for car drivers] ] The government spent $116 million in 2007-2008 [ [http://www.tbs-sct.gc.ca/est-pre/20072008/sups/A/pub/pdf/ME-001_e.pdf Supplementary Estimates (A), 2007-2008 For the Fiscal year ending March 31, 2008, page 11] ] , and allocated $102.7 million for fiscal year 2008-2009. [ [http://www.tbs-sct.gc.ca/est-pre/20082009/me-bd/pub/ME-001_e.PDF 2008-09 Estimates Parts I and II The Government Expense Plan and The Main Estimates, page 1-20] ]

Notes

External links

* [http://www.budget.gc.ca/2007/bp/bpc3e.html#transportation Budget 2007 Chapter 3 A Better Canada]
* [http://www.autoblog.com/2007/03/21/canadas-new-budget-will-add-4-000-tax-to-suvs/ Canada's new budget will add $4,000 tax to SUVs]
* [http://www.tc.gc.ca/programs/environment/ecotransport/ecoauto.htm ecoAUTO Rebate Program]