Stimulating Low-Carbon Vehicle Technologies
Governments around the world are increasingly intervening in automobile markets to
improve fuel economy and reduce emissions of CO2 from new vehicles. This report reviews
the rationale for such intervention and examines measures for maximum effectiveness
and minimum cost.
The Round Table brought together economists, policy makers and auto engineers with
the aim of advancing understanding of why car markets currently fail to deliver sufficient
fuel economy. It started by questioning whether any additional measures would be necessary
once an appropriate price for carbon dioxide is established via fuel taxes. It confirmed
that there are indeed market imperfections that merit additional government intervention.
Fuel economy and CO2 regulations are an essential part of the package. The key to
maximising the benefits of such regulations is long-term planning. The longer the
timeframe, the less industry investment is handicapped by uncertainty.
Subsidies to electric vehicles are more problematic because of the risks of prematurely
picking winning technologies and creating subsidy dependence. And electricity production
has yet to be decarbonised. However, intervention to steer innovation in this direction
is merited so long as the risks of not attaining climate policy targets are seen as
higher than the risks of intervention.
Published on December 16, 2010Also available in: French
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