Honda Canada is introducing a low-emissions incentive program for two of its models, in response to the federal government's ecoAUTO rebate program it says was based on "arbitrary" criteria.

The company claims the government program prized fuel efficiency over safety criteria, and said consumers who purchase or lease the 2007 Honda Fit or the 2006-07 Honda Civic with manual transmission will be given a $1,000 rebate. The incentive will be applied retroactively to March 20, 2007, when the program was introduced in the federal budget.

"In response to the government of Canada's arbitrary definition of fuel efficiency and to ensure that Canadians have an equal opportunity to purchase a vehicle that offers the right balance of environmental stewardship and safety, Honda Canada and its automobile dealers are responding," the company said in a statement released Thursday.

The ecoAUTO program applies to the purchase of new cars with consumption ratings of less than 6.5 litres of gasoline for every 100 kilometres driven, and minivans or SUVs rated at less than 8.3 litres/100 km (based on 55 per cent city driving and 45 per cent highway). The basic rebate on these vehicles is $1,000 and increases by $500 for every half-litre reduction, to a maximum of $2,000.

In Honda's fleet, the Civic hybrid was the sole car to qualify for the ecoAUTO program. By comparison, six vehicles made by rival automaker Toyota qualified for the list, including the subcompact Yaris. Sales of the Yaris have increased noticeably, with Toyota reporting 2,511 Yaris models purchased in April, an increase of 67.8 per cent over April 2006.

Some of Honda's vehicles that narrowly missed qualifying for the federal rebate, including the Fit, which uses 6.6 litres/100 km, outperform other cars including the Yaris in crash tests.

The Fit received a five-star rating from the U.S. National Highway Traffic Safety Administration, while the Yaris earned four stars. NHTSA bases its ratings on safety criteria including front and side crash results, anti-rollover features.

The Conservatives also introduced a penalty on some of the heaviest polluting non-commercial vehicles, but pickup trucks are exempt from the provisions. Vehicles that burn more than 13 litres/100 km face a penalty of at least $1,000. The penalty rises to a maximum of $4,000, levied on passenger vehicles that use more than 16 litres/100 km.

Increase gas taxes, analyst recommends

Toronto-based industry analyst Dennis Desrosiers said when the measures were rolled out that he welcomed initiatives promoting new technologies, but he said the government should have considered a gasoline tax hike. He said over the past four years, sales have dropped when gas prices have increased.

He also noted that higher gas prices would encourage manufacturers to import more efficient vehicles and adopt advanced diesel technology used in Europe.

Other industry observers criticized the inclusion of vehicles that use E85, a fuel made up of 85 per cent ethanol that emits fewer greenhouse gases. As there are only a couple of stations in Ontario that sell the fuel, situated in Guelph and Ottawa, drivers could qualify for the rebate with a car designed to use E85 or gasoline but still fill their cars exclusively with gasoline.