Incentives

Vehicle Tax, the cost, the environment (Part ii)

Following up from the previous post ( & comments), on this post incentives to purchase more fuel efficient vehicles would be discussed. within this context two issues have to be addressed the first being how to encourage new buyers to buy more fuel efficient cars, the other how to get "rid" of the bottom of the pyramid.

The first is through tax breaks for more fuel efficient cars and proportionally increase the tax with decreasing fuel efficiency. It could also be formulated in such a way that it would discourage the buyer from buying a inefficient car. A similar system exists where the engine capacity determines the tax, but with hybrid cars and other technologies on the horizon a gauge with fuel efficiency would be most appropriate (again this would have problems as fuel efficiency measures can vary as most company's tend to overrate their cars).

    

(x - Axis represents mpg)

In some countries (Ref) tax credit systems exist as incentives to buy hybrids, a study states based on the USA that:

"An aggressive fuel economy strategy, focused on hybrids, could be saving us as much as 6 million barrels of oil every day by 2025, but this will take good hybrids that more than double fuel economy compared to today." (Ref)

As all hybrid vehicles are not as fuel efficient as they seem, the tax incentive scheme should be focused on the efficiency of the actual vehicle rather than just the name tag of "hybrid". Here too an incentive based on fuel efficiency would be appropriate.

With regard to a comment made, that the old vehicles in Sri Lanka would not be replaced; as the preceding  post had mentioned the authorities do prohibit 1500 applications a month, therefore the older vehicles do get out of the system. Again the implementation with regard to this is questionable but a system exits, it is just to ensure implementation and the introduction of other various schemes to ensure that unroadworthy vehicles are out of the roads. The natural cycle also mentioned in the other post would also go into operation automatically with decreasing prices. The other raised point was the diesel subsidy and the taxes with regard to this, it is a vast topic and would be discussed in a future post.