UNIVERSITY OF NAIROBI ENTERPRISES AND SERVICES LTD DEVELOPMENT OF A FUEL ECONOMY LABELING AND FEEBATE PROGRAMME FOR MOTOR VEHICLES IN KENYA FINAL REPORT Submitted by: Report Submitted to: J. K. Kenduiwo Eng. Joseph Ng’ang’a Deputy Managing Director Director General University of Nairobi Enterprises and Services Limited Energy Regulatory Commission, Arboretum Drive, off State House Rd 3rd Floor, Eagle Africa, Longonot Road, Upper Hill P.O. Box 68241-00200 Nairobi, Kenya. P.O. Box 42681-00100, Tel: +254-20-2714240/0722-205498 NAIROBI. Fax:+254-20-2714048 Telephone +254-20-2847000/200, Fax : +254-20-2717603 E-mail: [email protected] website: www.uneskenya.com E-mail:[email protected] JUNE 2016 Development of a Fuel Economy Labeling and Feebate Programme for Motor Final Report Vehicles In Kenya June 2016 TABLE OF CONTENTS TABLE OF CONTENTS ......................................................................................................................................... I LIST OF TABLES ................................................................................................................................................ III LIST OF FIGURES .............................................................................................................................................. IV LIST OF ABBREVIATIONS ................................................................................................................................... V EXECUTIVE SUMMARY .................................................................................................................................... VI 1. INTRODUCTION ....................................................................................................................................... 1 1.1. BACKGROUND .......................................................................................................................................... 1 1.2. FEEBATE PROGRAM ................................................................................................................................... 2 1.3. VEHICLE LABELING..................................................................................................................................... 3 1.4. NEW VEHICLE PURCHASE SCHEME ............................................................................................................... 4 2. METHODOLOGY ...................................................................................................................................... 5 2.1 TERMS OF REFERENCE ..................................................................................................................................... 5 2.1.1 Fuel Economy Labeling Programme ................................................................................................ 5 2.1.2 Feebate Programme ........................................................................................................................ 5 2.1.3 New Vehicle Purchase Schemes....................................................................................................... 6 2.2 ECONOMETRIC ANALYSIS ................................................................................................................................. 6 3. VEHICLE LABELING PROGRAM ................................................................................................................. 8 3.1. LITERATURE REVIEW .................................................................................................................................. 8 3.1.1 Global Outlook of Fuel Efficiency Labeling ...................................................................................... 8 3.1.2 Fuel Efficiency Labels for Selected Countries ................................................................................... 9 3.1.3 Vehicle Labeling best practice ....................................................................................................... 14 3.2. PROPOSED VEHICLE LABELS FOR KENYA ....................................................................................................... 17 3.2.1 Proposed Label - I .......................................................................................................................... 17 3.2.2 Proposed Label - II ......................................................................................................................... 19 3.2.3 Proposed Label - III ........................................................................................................................ 19 3.3. IMPLEMENTATION OF VEHICLE LABELING PROGRAM ...................................................................................... 21 3.3.1 Ministry of Transport and Infrastructure (MoTI) ........................................................................... 21 3.3.2 National Transport and Safety Authority (NTSA) .......................................................................... 21 3.3.3 Kenya Bureau of Standards (KEBS) ................................................................................................ 21 3.3.4 Kenya Revenue Authority (KRA) .................................................................................................... 22 3.3.5 Ministry of Energy and Petroleum (MoEP) .................................................................................... 22 3.3.6 Energy Regulatory Commission (ERC) ........................................................................................... 22 3.3.7 National Environment Management Authority (NEMA) ............................................................... 22 3.3.8 Auto Dealers .................................................................................................................................. 23 3.4 POLICY SUGGESTIONS ................................................................................................................................... 23 3.5 FORESEEN CHALLENGES ................................................................................................................................ 24 3.5.1 Challenges in Data Management .................................................................................................. 24 3.5.2 Misrepresentation of Vehicle Information .................................................................................... 24 3.5.3 Non Compliance ............................................................................................................................ 24 3.5.4 Ignorance....................................................................................................................................... 24 3.5.5 Slow Implementation of Proposed Program ................................................................................. 24 4. NEW VEHICLE PURCHASE SCHEME ........................................................................................................ 25 University of Nairobi Enterprises and Services Ltd. Page i Energy Regulatory Commission Development of a Fuel Economy Labeling and Feebate Programme for Motor Final Report Vehicles In Kenya June 2016 5. FEEBATE PROGRAMME ......................................................................................................................... 28 5.1. LITERATURE REVIEW ................................................................................................................................ 28 5.1.1 Models of Feebate Systems implemented worldwide ................................................................... 29 5.1.2 Current taxation of motor vehicles and fuels efficiency in Kenya .................................................. 32 5.1.3 Best practices for Feebate programs ............................................................................................. 33 5.1.4 Key drivers for success and failures ............................................................................................... 34 5.2. PROPOSED LEGISLATION ........................................................................................................................... 35 5.3. BASELINE ANALYSIS .................................................................................................................................. 36 5.4. REVENUES BY AGE OF VEHICLE ................................................................................................................... 40 5.5. DETERMINATION OF KENYA’S FUEL ECONOMY BENCHMARKS –PIVOT POINTS ..................................................... 43 5.6. SCENARIOS FOR BENCHMARKS AND FEEBATE RATES ........................................................................................ 45 5.7. THE SCENARIOS ...................................................................................................................................... 47 5.8. FURTHER DESCRIPTIVE STATISTICS ............................................................................................................... 48 5.9. THE MODEL............................................................................................................................................ 49 5.10. DETERMINING THE BENCHMARK AND RATE ................................................................................................... 52 6. CONCLUSION ......................................................................................................................................... 60 7. RECOMMENDATIONS ...........................................................................................................................