A Supposed Rebate for Environmentally Friendly Cars?

Monday, August 13th, 2007
By Inya Ivkovic, MA for Profit Confidential

Lately the environment has become one of the major topics with which to score points with voters all over the world. Canada’s federal Conservatives have also jumped on the bandwagon, especially after the opposition seemed to be leading the green cause in the forefront. In retribution, Ottawa came out with an incentive program for cars and trucks, and it even coined a cute term for it — “ecoAuto feebate.”

The only problem with the feebate program is that the federal Conservatives failed to consult the car manufacturers, who actually might have had something constructive to add to the argument of its commercial viability. Plus, whoever bought cars and trucks that fell within the feebate guidelines since the last budget was announced have yet to receive the cash for making the environmentally “smart” decision. Obviously, administrative preparations for the incentive program have not yet materialized. Finally, the rules for feebate eligibility are wrought with contradiction, to say the least. Both the car manufacturers and consumers are still scratching their heads over it.

This is how Canada’s ecoAuto program is supposed to work: Every purchaser of a 2006/2007 fuel-efficient car should receive a $1,000-$2,000 rebate. Every purchaser of a 2006/2007 gas-guzzler should be fined between $1,000 and $4,000. The purpose of the program is to reduce greenhouse gas emissions while reducing fossil fuel consumption at the same time. So far, so good!

One of the problems is that the list of feebate-eligible cars is fairly limited, and those cars that can be fueled with an 85% ethanol mixture have even more limited access to gas stations supplying ethanol-based fuel. In addition, our government is very proficient in the sport of double standards. Namely, to appease rural voters, light trucks that consume 8.3 liters, as well as all pickup trucks, have been let off the penalty hook regardless of how much fuel they consume. Go figure!

No wonder Ottawa is clueless as to how to implement and enforce this highly confusing and largely inefficient policy. If the government really wanted to make a dent in environmental policies, it should have targeted incentives for the automobile industry to manufacture more of cheaper hybrid and fuel-efficient vehicles. It should have also mandated that every gas station provide ethanol-based fuel mixture pumps. And then, when all that was in place, the feebate program should have been spelled out clearly and fairly for every model, from incentives to fines.

Next Post: Bail Out Whom?
Previous Post: Flying with Airline Stocks

Tags: oil stocks, stock market