This is ingenious; for every gas guzzler that goes off the road, an efficient, low-pollution car gets on! We need a system like this in the U.S. Kudos to France for leading the way.

A similar approach will be enforced also in Finland:

"Finnish Parliament passes CO2-based car tax scheme

4.12.2007 at 18:30

Finland's Parliament on Tuesday passed a bill changing the country's car tax scheme from a flat-rate sales tax into a staggered scheme where the rate ranges between ten and 40 per cent of a vehicle's retail value, depending on how much carbon dioxide it emits.

Cars that are not CO2-rated will be taxed on the basis of kerb weight and type of fuel.

The staggered car tax system is to be applied to both new cars and used ones imported from abroad."

http://newsroom.finland.fi/stt/showarticle.asp?intNWSAID=17460&group=Politics

The structure of this feebate should increase consumer demand for high fuel economy vehicles. This is generally considered less disruptive than attempts to regulate supply.

However, the German auto industry association VDA has complained that the French proposal uses the cover of climate policy to give its domestic car makers an old-fashioned competitive advantage over their German rivals. There may be something to this, the French are after all the French.

Perhaps President Sarkozy is taking this action now because Germany may succeed in watering down the EU's plans for fleet average CO2 emissions by introducing separate targets for multiple weight classes. This would let it own car makers retain their dominance in the lucrative premium segments. Evidently, industrial policy cuts both ways.

Note that Germany will probably switch the basis for its annual road tax from displacement to CO2 emissions in 2009. The VDA has been calling for a final decision on this either way for months, as the uncertainty has compounded adverse market conditions caused by record fuel prices and a 3% hike in sales tax in January. New car sales in Germany in 2007 are at their lowest ebb since 1989.

Moreover, next year will see the introduction of "Umweltzonen" (enironmental zones) in several cities, to comply with an EU directive on air quality. In practice, this will boil down to barring vehicles with old, dirty diesel and gasoline engines from access to city centers on days with bad air quality. A program of subsidized DPF retrofits, intended to avoid such unpopular bans, backfired badly after it became known that some of the devices approved for installation were in fact defective.

The hope now is that many old clunkers will be scrapped or exported, e.g. to Africa. Don't be surprised if the VDA lobbies for fiscal incentives to get domestic new car sales going again.

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Btw, the Netherlands also imposes steep taxes on vehicle registrations, based on value but adjusted for fuel economy relative to length x width.

Denmark, another country battling traffic congestion and capital outflows due to car purchases, also imposes famously high taxes whenever a car changes hands. These often exceed the purchase cost, but there are are discounts for safety equipment and high fuel economy, which is also the basis for the annual license fee.

The city of London is considering a modification to its congestion charge based on UK road tax bands, which are based on CO2 emissions. However, there is a loophole: vehicles registered as minicabs can avoid the charge altogether.

Here's a brief - but incomplete - overview of how different European countries accounted for fuel economy/CO2 emissions in their vehicle taxation in 2007:

http://www.acea.be/images/uploads/pr/Co2_tax_overview~Overview.pdf

Henrik
The disadvantage of the feebate, one-off tax lump sum is that it does not tax driving style or distance driven. MPG or l/100km is only half the story. Miles or km per year is the other side of the equation affecting CO2 emissions and use of finite resources.

There is also the human nature reaction of getting a return on ones 'investment'. AKA: I paid for it, now I'll use it.

We need a system like this in the US,because we are the single largest producers of CO2 in the world and the only thing that is going to get us out of our gas guzzling SUVs is feebates.Pollution is a problem for you wherever you live.California receiving acid rain from China is an example of the small system we all live in.If pollution does not bother you,consider how much money we could keep here in the good ol'USA if we didn't send it all to Saudi Arabia.Feebates are awesome because they help lower income people get out from under their gas guzzlers.

Thomas

You have a good point. A feebate system does not help much on subsequent >driving behavior<. However, most people >90% only knows one way to drive and this is not likely to change whether they pay a $4 tax per gallon or not. So driving behavior is more of a theoretical possibility than it is a practically matter.

Your other point about the >distance driven< can be incorporated into the feebate system by using a different feebate for each vehicle category. For instance, a car that is registered as a taxi should be subject to a much more profound feebate because it will likely do 80000 miles per year and not the usual 15000 miles per year. In fact it should be 80000/15000 = 5.3 times more profound.

The good thing about a feebate is that it will instantly make it profitable for vehicle manufactories to offer vehicles that use: 1) Expensive light weight materials. 2) Expensive drive trains such as diesel, advanced gasoline or hybrids. 3) To use designs with low drag coefficients instead of fancy design. 4) Use expensive but more efficient transmissions.

We need all four things and we need it now. Fuel taxes can’t do the magic. Their effect is too little and too slow.

The economist in me says that this is doomed to fail. Some possible scenarios:

1. The government has overestimated the amount of money they will make on the penalties and will eventually find that they don't have sufficient money for the feebates that they promised. In the end, they'll have to reduce the feebates.

2. Automobiles that emit low amounts of CO2 have an artificial sales advantage over other automobiles. The manufacturers now have less incentive to improve the overall appeal of the car and also less incentive to hold down prices on those cars. They might choose to redirect resources towards improving and reducing the cost of their more polluting models that are at a disadvantage. They may also choose to sell those models outside the country, where they can make more profit. I'm guessing the penalty only applies to domestically purchased vehicles, and a penalty is not collected on exported vehicles.

3. Automobile manufacturers start selling stripped down versions of the polluting models, to get the CO2 emissions down, as well as the cost. At the same time, they get into the business of aftermarket modifications that increase engine performance and/or increase the weight of the vehicle. Both of which also increase CO2 emissions.

Kit P you're at it again!!!

I prefer the French proposal because it gives a significant bonus to buyers of cleaner vehicles and penalies buyers of polluting gas guzzlers. In reality, such scheme could be tax/revenue neutral. The 130 gr/Km pivot point is rather generous but could be easily adjusted to 100 gr/Km or less as technology advances.

Since pollution travels across international borders, an international car pollution fees/bonus scheme could have more impact. The European Community could (and probably will be) the leader.

Who will convince USA, Canada, China, India that they also have to do more?

Feebate scheme has distinct advantage over punitive taxation. It allows more people to afford and enjoy freedom of personal transportation.

Interesting, that both Canadian and France conservative governments choose such wealth re-distribution approach.

Bear in mind that a feebate is one of a range of market based measures being used and proposed to reduce GHG emissions from cars.
France is not intending to replace the taxation on gasoline. So French motorists will still be heavily taxed on every litre of fuel they burn in their cars in addition to paying a fee when they buy a gas guzzler. Indeed, European states have been criticised even within the EU for relying too heavily on road fuel taxes while under taxing other crude oil fuels for aviation, shipping, farming, motor racing & machinery.
European state governments have become addicted to road fuel taxes for reaching their revenue budgets.
In Britain they have the absurd situation where taxation on bio diesel made from used oil comprises Road Fuel Duty at 30.35 pence per litre plus VAT at up to 15 pence giving a total of 45 pence per litre. So about 90 cents per litre or roughly $3.60 per US gallon! Taxation on bio diesel made from new oil has been even higher. Fortunately, they have given up on collecting the tax on waste oil recycled for personal use up to 2500 litres per year.
Road fuel tax legislation is outdated and based on use rather than fossil fuel content; hence it is currently a very rough tool for tackling GHG emissions.
One way to improve fuel taxation is to set a GHG target of 40% gasoline equivalent or 80% now sliding down to 40% in 2050. The fossil fuel content of each renewable fuel can be calculated; fuel can then be taxed on the GHG emissions above the target. This would have the effect of driving down fossil fuel content while letting the market find the most cost effective means.
Road fuel taxes can be mitigated slightly by including Pay At The Pump (PATP) insurance. PATP insurance will provide minimum car insurance to low income drivers and enable drivers and pedestrians to recover costs from drivers who are currently uninsured.
The increasing renewable fuel standards in Europe & USA will reduce state coffers by billions. Likewise, increased fuel economy standards will reduce tax revenue from road fuel tax. It makes sense to transfer some of that tax burden to new car sales tax by making it proportional to CO2 emissions.

Feebates could also be tweaked to encourage emerging technology. For example consumables like fuel are normally excluded from car sales tax; so traction batteries could be classified as consumables and excluded from the GHG sales tax.
Likewise, CO2 emissions could be based on city mileage instead of highway or composite mileage; that would reduce the price premium of HEVs and PHEVs.

Britain, Ireland and other countries are also changing their annual car licence fees so that they vary with CO2 emissions. London is amending the congestion charge so that gas guzzlers pay more (as well as planning an exclusion zone for old diesels).

We also need a GHG tax on all fossil fuels, which would include the external cost of GHG emissions in car component manufacture and electricity.
However, this is harder to implement unilaterally because of the effect on the competitiveness of commerce & industry in global markets. (Britain has a “Climate Change Levy on electricity but it is currently less than the external cost of GHG emissions.)
A GHG or "carbon" tax will probably have to be included in the successor to the Kyoto treaty and enacted by ratifying the treaty. It will need to be backed up by an equivalent GHG excise duty on imports from states that have not yet ratified the treaty. That will be very hard to achieve because it will require revision of the WTO trade rules. It would also be virtually impossible to enforce because most goods are assembled from components made in many different countries.

A BEV would do fine as a holiday hire car.
Anyone fancy a holiday next year in Paris, the Mediterranean or Corsica?

It depends on whether your country is a car producing or consuming nation.
Ireland only consumes, so you have taxes only.
France produces as well, so you have the feebate system.
The tax only system is simpler and less prone to costing money. In particular, since many cars are imported, you are probably doing more good by raising taxes and lowering CO2 than harm in reducing demand for locally produced cars.
At least in France, they can call an electric car zero CO2 as most of their electricity is generated by Nuclear power.

==Feebate lump sum taxes on cars are better than fuel taxes because 1) They have a larger impact. 2) They are tax neutral. 3) They are easy to adjust. 4) And unlike a gas tax that also punish the low polluting vehicles the feebate reward the low polluting vehicles.==

Exactly.

==“We need a system like this in the U.S.” Why? The US is not France. Traffic congestion and air pollution, not something I have to worry about.==

Well. 1. We have to pay the international price for petroleum as everyone else. So higher fuel economy is a very good thing. 2. More importantly, to deal with global warming.

So rather than ask why, the real question is, why not?

Looks like the French are serious about electrified transport. This plays into their strength: they have lots of nuclear power that sits idle at night.