To recap, feebates (sometimes called "freebates") are a great way to harness market forces to encourage energy efficiency and discourage pollution. The article above gives a good explanation of how they’d work:
The proposal would require owners of more polluting vehicles to pay an extra levy, while drivers of environmentally friendly cars would reap the benefits and receive a grant as a reward for buying fuel-efficient vehicles.
So people who buy gas guzzlers pay a fee that’s refunded to people who buy gas-sippers–creating a powerful incentive for continual improvements to automobile efficiency.
One of the great features of feebates is that they pay for themselves — taxpayers don’t even get involved. In fact, the UK proposal is to use feebates to replace the existing vehicle excise duty, which apparently has had little effect on consumers’ vehicle choices.
And by the way — I can’t recommend Green Budget News enough. Almost every article holds some fragmentary insight into tax shifting and market oriented sustainability. And while it’s focused on the European Union, it’s chock full of ideas that could be adopted in this part of the world as well. The current edition of the newsletter, which is published by Green Budget Germany, also contains informative updates on congestion pricing in Scotland and Austria and vehicle, pollution, and energy taxes in Denmark.