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India Leaps Ahead: Feebates—An Important Policy Lever for Future Mobility System

Feebates—market-based, revenue-neutral, and size-neutral—can act as an important policy lever in support of India’s “leapfrog” vision of an electric, shared, and connected mobility system by incentivizing the production and use of clean vehicles, according to a new report. 

A feebate is a mechanism by which inefficient or polluting vehicles incur a surcharge (fee-) while efficient ones receive a rebate (bate-). By offering a steady price signal, feebates can encourage and accelerate the growth of a new mobility system by encouraging Indian consumers to purchase clean vehicles and for Indian manufacturers to produce them, while speeding the retirement of inefficient vehicles. Because it is technology-neutral, feebates also can be applied to two-, three-, and four-wheeled vehicles.

Why This Matters

India is at a critical juncture in its infrastructure, energy, and mobility development. The nation has seen a 10 percent annual increase in vehicles registrations over the last decade and is set to surpass Germany as the world’s fourth-largest car market by domestic sales by the end of 2017. If current mobility trends continue, the number of personal vehicles in India could increase three- to four-fold by 2030, at significant direct and indirect costs to India’s citizens, economy, and environment. Now, India has set ambitious targets of installing 175 gigawatts of renewable energy generation by 2022, and a draft government target aims to generate 57 percent of India’s electricity from non-fossil sources by 2027. These targets, coupled with India’s electric mobility vision, can create more value and be more readily achieved when pursued together, rather than separately. And as mobility costs impact low- and moderate-income citizens the most, this transformation could provide important economic and social benefits to this population segment.

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