Canada’s ecoAUTO program was set up by the federal government to encourage the purchase of fuel efficient vehicles through financial incentives. The program was funded by levies on the most inefficient vehicles and provided rebates of $1000 to $2000 for the purchase of fuel sipping models (the $1000 rebate threshold was 6.0L/100KM, or 39 mpg US).

However, after just a year and a significant amount of complaint and pressure from auto manufacturers (who incidentally make bigger profit margins on less fuel efficient vehicles like SUVs) the government announced in today’s budget that it will allow the ecoAuto program to lapse.

Instead, the Canadian government is pledging $250 million over the next five years to assist the auto industry in developing green technology. In short, Canada is attempting to move its effort from one based on consumer demand to one based on government support of big business.

While government development of green technology certainly has its place, the auto industry is largely motivated by consumer demand. In the case of the ecoAUTO program, we already saw the Honda Fit, which initially missed the rebate cutoff by 0.1 L/100 km, tweaked to get better fuel economy to appeal to more consumers through the rebate. The Fit was just one of several vehicles modified for improved efficiency by manufacturers in response to the program.

Of course, the program was flawed, as many new programs (and cars) tend to be, but it is unclear that government subsidies will make a more profound difference in the auto market than an economically motivated move towards smaller cars.

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Source: Globe and Mail