Fuel Efficiency Labelling for Vehicles

The Issue

In the current climate of increasing environmental concerns and efforts to reduce our dependence on oil, authorities are attempting to put in place programs and measures that will raise consumers’ awareness and encourage them to make more responsible choices when it comes to the energy efficiency of vehicles.

For the last 10 years, governments have been trying to encourage individual citizens to help reduce greenhouse gas emissions. The results of this approach are modest at best, as the evaluation of the One-Tonne Challenge, for example, has shown.

Regardless of theoretical models developed by economists, when a consumer is shopping for a car, and deciding which car would best serve them, he or she is unlikely to act rationally. This is at least partly due to the impact of marketing by the automobile industry on our culture, our increasingly urban way of life, our economy and our perceptions.

The automobile industry has access to technology that would allow Canadian motorists to drive more energy-efficient vehicles. Yet the most recent technological improvements have brought us heavier and more powerful vehicles rather than more energy-efficient ones. To try to encourage the industry to produce more efficient vehicles, the federal government has introduced measures offering discounts on more energy-efficient vehicles along with a green levy penalizing fuel- inefficient vehicles.

Consumers’ expectations are probably not consistent enough to directly influence the automobile industry to change the kind of vehicles it produces. Therefore, while it is important for government to apply incentives or punitive measures, it is also important that consumers be informed of the vehicle’s energy efficiency and impact on the environment, so that they may weigh these factors, in addition to the cost of the vehicle. Consumers must be encouraged to modify their choices and their behaviour with regard to automobiles to be more in line with environmental challenges. So far, advertising has essentially promoted values that discourage consumers from acting rationally when it comes to energy efficiency.

Labelling is one way to better inform consumers. These labels would provide potential buyers with information on fuel consumption, greenhouse gas emissions, the effect of additional vehicular options on fuel consumption and the environment, and the costs of these choices.

Paired with tax rebate (“feebate”) programs, energy-efficiency labelling could help to increase consumer awareness and encourage more responsible choices. To be effective, these labelling programs should be carefully thought out and a standardized appearance, content and placement should be required of car dealers.

Recommendations

1. That Natural Resources Canada adopt new energy-efficiency labelling of automobiles based on best practices globally. This labelling should indicate for each vehicle: a consumption rating expressed in litres per 100 km; a rating indicating the quantity of CO2 emissions expressed in grams per kilometre; the estimated annual fuel consumption based on a standard calculation; as well as a rating comparing the vehicle’s energy efficiency with all vehicles sold in Canada – using a calculation that would take into account both fuel consumption and pollution emission levels and that would adopt a “dynamic approach”
2. That this labelling be mandatory for every new car sold or leased in Canada and that this obligation be gradually extended to used vehicles sold in Canada.
3. That the federal government put in place a tax rebate/“feebate” program adjusted according to the energy-efficiency rating of the vehicles.
4. That a series of incentive programs be adopted that are designed to increase the effect of the other proposed measures and to increase the energy performance of vehicles (for example, sales tax adjustments for all types of vehicles including mopeds, bicycles and recreational vehicles, adjustments to vehicle registration fees, gradual fuel tax increases, promotion of less harmful fuels for the environment, improvement of public transit, etc.);
5. That impact studies be conducted to ensure that the existence of different programs does not introduce unfair situations and that tax and/or fiscal measures be implemented to compensate for these problems, if needed; and where adopting a given measure would penalize certain social groups (for example, those with limited income, large families, those living in remote areas, those who require a certain type of vehicle for their work, etc.) that tax and/or fiscal measures be implemented to compensate for the effect of inequity.
6. That a task force be created to review the issues of automobile advertising and the environment, with the aim of proposing a code of ethics or some form of regulatory framework for automobile advertising, which addresses the above mentioned concerns.