The encyclopedia · Finance & Accounting · Financial decision · 2008–2018
France's 'feebate' taxed dirty cars and rebated clean ones in one neutral budget
France's 2008 bonus-malus charged high-CO2 cars and subsidised low-CO2 ones, steering the fleet toward efficiency without costing the public purse.
Government of France
the move
Car emissions were creeping up in France because buyers faced no price signal for CO2: fuel taxes were blunt, and no one was rewarded for buying a cleaner car.
In 2008 France introduced a bonus-malus: a registration fee on high-CO2 cars and a rebate on low-CO2 ones, pivoting around an emissions threshold. Because the fees pay for the rebates, the programme is close to revenue-neutral for the state.
The result is a built-in incentive gradient that re-prices choice rather than taxing everyone. Evaluations of the 2008 version estimated it raised welfare, and it permanently shifted sales toward lower-emission vehicles, even as the fleet's size kept rising.
why it works
- Fuel taxes and standards were not creating a per-car CO2 price signal
- The fee pays for the rebate, so the programme is roughly revenue-neutral
- A pivot threshold makes every car's price depend on its emissions
- The gradient pushes buyers upmarket toward cleaner cars without a new budget line
what transfers
Steer a market on a self-financing tax with no net cost to the treasury; pair a fee on the unwanted behaviour with a rebate on the wanted one so the price gradient, not the budget, does the work.
what came after
The feebate was copied by several countries and states as a lighter-touch alternative to an economy-wide carbon price, and it became a reference case in the economics of feebates and fuel-economy standards. Its welfare effects and distributional footprint are still studied.
references
- Winners and Losers: The Distributional Effects of the French Feebate on the Automobile Market
- Winners and Losers: The Distributional Effects of the French Feebate on the Automobile Market
spotted an error? The archive wants to know.