Canadian Finance Minister Jim Flaherty unveiled a new budget in parliament this week, and it includes incentives for Canadians to drive greener vehicles. The Vehicle Efficiency Incentive will provide a tax break of up to $2,000 to people who buy more fuel efficient vehicles, no incentives or penalties to purchasers of vehicles with average fuel economy and a new tax on gas-guzzlers.

The Transport Canada combined fuel economy ratings of new cars will be compared to thresholds to determine if they get rebates or new taxes. Cars that get ratings of better than 36 mpg will get a break as will vans, SUVs and other light trucks that get better than 28.3mpg. The rebates will range from $1,000 up to a maximum of $2,000 based on how much beyond the threshold they achieve. There is also a $1,000 rebate for E-85 capable vehicles.

Passenger cars that get less than 18mpg will be charged an extra $1,000 and that will increase in thousand dollar increments up to a maximum of $4,000 for cars that get less than 14.7mpg. In addition to the sticks and carrots for new cars, the budget also allocates $6 million for expanding programs to scrap older cars that use more fuel and emit more pollution. These are the kinds of programs that could help enhance the benefit of any fuel economy standard increases in the United States, because it addresses the demand, rather than just the supply.

[Source: Canadian Driver, thanks to Paul and TJ for the tip]

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