An equity analysis of proposed feebate policies for California households

The California Air Resources Board funded a research project at the University of California to evaluate feebate policies as a means to reduce greenhouse gas emissions from passenger vehicles. This paper is based off of that research, and assesses the impacts of proposed feebate policies in California to determine if they are regressive. The approach uses an econometric model of consumer choices in the auto market that is estimated for California households. A model of manufacturer decisions using system optimization is used to predict vehicle design changes in response to the policy. Given projected vehicle designs and demographic data, the consumer choice model is used to simulate the vehicle holdings of California households through the year 2025. Simulations results are obtained for various policy scenarios one scenario has no feebate in place, while others have different feebate variations that differ based on the feebate benchmark. The simulation results for each scenario are used to compute consumer surplus for California households the changes in surplus from one policy scenario to the next are used to determine whether or not various feebate alternatives are regressive. Consumer surplus increased for all income groups by a very small amount when feebate policies were implemented. Surplus increases by a greater percentage for low income households than high income households, indicating that the feebate policies studied are not regressive.