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Canada auto emissions incentives seen ineffective

From autonews| March 21,2007

A Canadian government plan to offer rebates for fuel-efficient vehicles and heavily tax gas-guzzlers will do little to change consumer buying habits and curb emissions, industry observers and environment groups said today.

"The policy is ineffective and it's going to fail," said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. "There may be a few more consumers benefit by buying hybrids, but it will primarily be a tax grab by the federal government targeting buyers of ... large SUVs."

The Conservative government unveiled a rebate on Monday, March 19, of up to $1,700 (Canadian $2,000) for purchases of new fuel-efficient vehicles, and a levy of up to #3,444 (Canadian $4,000) on high-emissions passenger vehicles such as luxury SUVs.

The new tax on high-emissions vehicles will affect only 4 percent of the Canadian auto market and targets the most "inelastic" consumers, DesRosiers said in an interview.

He points to similar policies in the provinces of Ontario and British Columbia that have so far failed to change consumer buying habits "one iota."

At most, the tax would remove up to 5,000 gas-guzzlers from the roads, he said.

The new federal policy is expected to primarily hit makers of big SUVs such as General Motors, Ford Motor Co. and DaimlerChrysler, while Toyota Motor Corp. should prove the biggest winner with cars such as its low-emissions Prius hybrid and subcompact Yaris.

Most major carmakers have at least one car on the rebate list, including GM's Saturn Vue hybrid, Chrysler's Jeep Patriot and flexible-fuel versions of the Chevrolet Impala and Chrysler Sebring sedans.

About half the 1.6 million vehicles bought in Canada last year were in the compact or subcompact categories, and could qualify for a rebate as fuel efficient, DesRosiers said.

"But what has been absolutely proven is that if you increase the price of gas, consumers buy more fuel-efficient vehicles," he said. "Its the most environmentally friendly thing that you can do."

Environmental groups, meanwhile, praised the government's modest move but said its "vehicle efficiency incentive" would be relatively ineffective in reducing emissions from passenger vehicles, which account for about 12 percent of Canada's overall greenhouse gases.

"I don't think we're going to change the greenhouse gas profile of our transportation emissions through this measure," said Mark Winfield of the Pembina Institute, an energy and environmental think-tank.

Canada "needs a much more comprehensive and integrated strategy if we're going to make any serious progress," he said.

Ottawa is under pressure to do more on the environment, but did not mention the Kyoto protocol on greenhouse gas emissions in Monday's federal budget. Canada has signed on to Kyoto to slash its emissions, but the Conservatives have said the country can't possibly attain its targets.

The Canadian Vehicle Manufacturers Association -- speaking on behalf of GM, Ford and DaimlerChrysler -- has been quoted in newspaper articles saying that the levy would drive consumers south of the border to buy SUVs in the United States.

The association did not immediately return calls.

Ontario, Canada's most populous province, is home to several of the Detroit 3's plants.

"This sends all the wrong messages to their head offices ... and the timing couldn't be worse," DesRosiers said.

Toyota and Honda also manufacture vehicles in Ontario.


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