Cars,carbon, and Kyoto: Evaluating an emission charge and other policy instruments as incentives for a transition to hybrid cars in New Zealand

Abstract

Transition to hybrid petrol/electric vehicles (HEVs) is one means among many of reducing carbon emissions pursuant to the New Zealand emissions reduction targets under the Kyoto Protocol. The potential financial incentive value of an emissions charge was evaluated by comparing purchase and running costs of an HEV with an equivalent petrol‐fuelled car. Had a carbon tax of $15/tonne CO₂ operated in January 2006, the net fuel efficiency saving on the basis of the emissions charge and the inbuilt fuel efficiency of the HEV amounted to $655.50 annually for an HEV. When compared with a $7000 purchase price differential in favour of petrol‐fuelled vehicles, it can be concluded the proposed carbon tax would not have provided a sufficient incentive to bring about any significant change in the distribution of HEVs across the market. Shifting the norm to a higher proportion of fuel‐efficient cars will therefore require other incentives and/or policy mechanisms. We explore alternative policy options for bringing about such a shift, including the option of a tradable vehicle emission permit system.