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Electric Vehicles: The Case for (and Against) Incentives

Fortnightly Magazine - April 15 1996

mind. For example, feebates could be selected to 1) reflect the relative emissions from the different vehicles, 2) to boost EV sales to a particular target, or 3) to ensure that revenues from fees would cover rebates paid to EV owners.

Feebates are attractive in theory, but it is important to look closely at the practical aspects of running a feebate program from one year to the next. In a 1995 article in System Dynamics Review, I looked at feebates through the eyes of a California state official who would face the challenge of running such a program. The article describes a model developed to simulate the impact of feebates on vehicle sales, on the utility system, and on the emission of air pollutants. The computer simulations showed that a simple feebate could put the state government in financial trouble. The simulations also showed that California would find it extremely difficult to dig itself out of the financial hole by adjusting feebates after problems arose.

Nevertheless, computer simulations indicate that these difficulties can be avoided if the state is willing to give the fund manager some latitude in running the program. It should be possible to keep a feebate program in the black if the state allows the fund manager to build a cushion in the early years of the program. The state must also allow the fund manager to alter the size of the fees or rebates on an annual basis. And finally, the state should not expect that the fund manager will necessarily keep the sum of the fee and the rebate fixed at an estimate of the environmental value of the EV. The most important conclusion from the feebate analysis is that it is possible to control a feebate system using readily available information. In other words, "crystal ball" forecasts of EV sales are not required for the state to run the program.

In sum, feebates have drawn praise by energy experts for their flexibility in a market marked by rapid technological change. Utility managers and regulators who are reluctant to see higher electric rates from utility incentives would do well to support feebates as an alternative approach to encourage the sale of cleaner vehicles. t

Andrew Ford is associate professor of environmental science and regional planning at Washington State University, and has worked extensively in simulation modeling on energy and environmental issues in the West. Dr. Ford initiated the research described here while at the Systems Management Department of the University of Southern California.

 

Bibliography

1. California Air Resources Board, Mobile Source Division (Staff Report), "Proposed Amendments to the ZEV Requirements for Passenger Cars and Light-Duty Trucks," Feb. 9, 1996.

2. Cross, Phillip S. "NGVs-Are Ratepayer Subsidies Appropriate?" Public Utilities Fortnightly , May 1, 1995, p. 42.

3. Dabels, John, General Motors Corp., "Environmental Requirements and the Impact Prototype Vehicle," International Conference on the Urban Electric Vehicle, Stockholm, May 1992.

4. DeCicco, John, "Feebates for Fuel Economy," report of the American Council for an Energy Efficient Economy, September 1992.

5. Evolution, Monthly Newsletter of the Electric Vehicle