Impacts on living expenditure by feebate system in Japanese automobile market

Panel: Panel 3: Mobility and Transport

Authors:
Keiko Hirota, Japan Automobile Research Institute
Kiyoyuki Minato, Japan Automobile Research Institute

Abstract

After the Kyoto Conference (COP3), the Japanese transport sector has been required to reduce 16% of Carbon Dioxide (CO_2) emissions by 2010. The Japanese government has decided to improve the fuel economy standard in 2010, which improves it an average of 22.8% for passenger cars from the 1995 level. However Japanese consumers tend to prefer heavier passenger cars such as four-wheel drive or recreational vehicles.

Due to the difficult target of COP3, political implementations should be not only automotive technologies but also non-technical measures. Since Japanese vehicle taxes are expensive compared to other OECD countries, the "feebate system" is proposed. fee / rebate is imposed / refunded according to a new car's fuel economy.

The feebate system would change consumer preference toward energy saving vehicles Elasticity analysis shows that changes in tax level have the highest impact on acquisition. The feebate system is simulated in place of acquisition tax.

To determine sales projection, population growth, and drivers' genders and ages are taken into account. Our estimations for the fuel economy technology improvement rate until 2010 provide three scenarios. The contribution of this paper will be to propose an optimal feebate level according to CO_2 emission reduction. Supposing that feebate is equal for CO_2 emission reductions in the three scenarios of fuel economy, feebate levels per passenger car are calculated to 2010. These feebate levels would change the annual living expenditure purchase cost. In consequence, we have to decide upon an option: how severe to make the fuel consumption standard and/or how high to raise fees for CO_2 reduction.