The Vehicle Efficiency Incentive (VEI) was introduced in the 2007 Canadian federal government budget, aimed at promoting fuel-efficient vehicles. The VEI took effect on March 20, 2007, and it included a performance-based rebate program offering up to $2,000 for the purchase of a new fuel-efficient vehicle, a neutral treatment of a broad range of vehicles with average fuel efficiency that were widely purchased by Canadians, and a new Green Levy on fuel-inefficient vehicles.
The rebate program, eventually called ecoAUTO Rebate Program, initially offered $1,000 for new automobiles with a combined fuel consumption rating of 6.5 L/100 km (43.5 mpg) or better and minivans, sport utility vehicles (SUVs) & other light trucks with fuel consumption of 8.3 L/100 km (34 mpg) or better, calculated based on a combined 55 per cent city and 45 per cent highway rating. An additional $500 was offered for each half litre per 100 km improvement in the combined fuel-efficiency rating of the vehicle below these thresholds, for a maximum total of $2,000. The ecoAUTO rebate program applied to 2006, 2007 and 2008 model-year vehicles purchased or leased (12 months or more) between March 20, 2007 and December 31, 2008. All applications must have been received by March 31, 2009.
A Green Levy was charged for new passenger vehicles (excluding trucks) with fuel-efficiency ratings of 13.0 L/100 km (21.7 mpg) or worse. The incentive structure will include a new Green Levy on these types of vehicles, payable by the manufacturer or importer when the vehicles are delivered into the Canadian market. The fuel-efficiency rating is calculated based on the same criteria as the rebate program above. The Green Levy will start at $1,000 for passenger vehicles with combined fuel-efficiency ratings of at between 13.0 L/100 km and 14.0 L/100 km (20.2 mpg), and increase in $1,000 increments for each full litre per 100 km increase in the combined fuel-efficiency rating above the 13.0 L/100 km floor, to a maximum of $4,000, for vehicles with ratings of 16.0 L/100 km (17.7 mpg) or worse.
In addition to the incentives and levies, the Canadian Federal Budget of 2007 provided $6 million over the next two years for a seven-fold increase in annual federal support delivered through Environment Canada for scrappage programs, and it provided for $30 million over the next two years for incentives to be designed by Environment Canada and Transport Canada in consultation with stakeholders that will remove older, high-emitting vehicles from Canadian roads.