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III. PERSPECTIVE AND POLICY ALTERNATIVES FOR GROSS EMITTERS

There are alternatives to the inspection and maintenance (I&M) and EMVR programs the political process has deployed against emissions from in-use vehicles. In addition, the new stricter standards just approved by the President have increased the importance of heavy duty vehicles. They are overlooked by EMVR programs, natural attrition occurs more slowly for heavy duty vehicles, and they are especially significant causes of the ozone and fine particulate matter targeted by the new standards.

A vehicle emissions fee (VEF) is among the options that do not require technological advances to implement. Mills (1974) was the first to propose a VEF. Mills and Graves (1986), Harrington et al (1994), and Innes (1996) are more recent VEF proposals. A VEF can indirectly link mobile and stationary sources and minimize total abatement costs, because the authorities might maintain a VEF at the level that equates the marginal control costs of mobile and stationary sources.

Mills and Graves (1986) advocated a VEF assessment for new cars based on EPA's test of new cars, and listed on new car window stickers. Innes (1996) argued for an emissions fee for new vehicles, combined with public funding of some EMVR. Mills and Graves (1986) also said each region should levy an emissions fee on used vehicles when they receive the annual or semi-annual inspection already required in non-attainment areas. Each assessment would depend on where the owner lives (how dirty, which pollutants) and miles driven.

A VEF would spur improved maintenance of emission control systems, at least prior to the emission tests that would determine the assessment. Since it isn’t worth paying the fee, or the repair costs of reducing those charges, for some still functional vehicles, a VEF would hasten vehicle retirement. A tax rate cut to offset the household budget effect of a VEF could (8) produce efficiency gains in some regions. The fee's above-average impact on low income families could be offset by using some of the revenues to fund lump-sum transfers, or to directly subsidize repairs or the purchase of a replacement car. Because the VEF is much more visible and certain than the offsets, the promise to offset might not reduce political opposition much. However, a VEF’s biggest drawback is the difficulty public officials will face keeping the fee for each criteria pollutant in each region at the efficient (9) level.

Careful use of remote sensing technologies (Bishop et al 1993) would reduce VEF shortcomings such as deterioration and tampering between the scheduled I&M inspections (10) that are now as much as two years apart. Remote sensing practices can also bring about significant changes in the location and timing of emissions. A mixture of secret, and well-publicized, sensor deployments could catch gross emitters, and influence the timing and location of emissions significantly. Publicizing the deployment of sensors at chronically congested spots near ambient air quality monitors on hot, windless days will keep some people away from those spots, especially motorists who feel they have high emission rates to hide.

A tradable discharge permit market that mobile sources could participate in through on-board meters (11) for tailpipe and evaporative emissions is an ideal, but still infeasible approach. Tamper-resistant emission-measurement devices for automobile tailpipes already exist (Innes 1996), but they are too still too expensive. A cheaper, real-time, on-board sensor would allow the metering of motorists and other mobile sources. A part of the envisioned, cheaper metering technology is a meter that would deplete emission allowances or credits purchased by motorists from the same regional brokers that already facilitate permit trades among stationary sources. The price of the credits, and hence the incentive to better maintain emission controls, and retire cars before their transportation value disappears, is market-determined. To facilitate tailoring to regional conditions, the new technology should eventually allow the credit depletion rate to vary with the vehicle’s precise location, the time of day, and atmospheric conditions.

Long ago, an official told me that technical problems are temporary, but people problems are often insurmountable. The intervening years have convinced me that he was right. Therefore, a policy option should not be dismissed because it would require a technology that does not exist. The biggest barriers to new policies are political, not technical. The pace of innovation for a new technology depends on the development of an "environmental policy that produces an economic reward for doing so (Dudek 1993)." Milliman and Prince (1989) found that emission fees and salable emission permits promote technological change best. An interim policy must provide strong incentives to develop the new technology and a smooth transition to the new policy once it is viable. An extension of salable permits to mobile sources is more attractive than EMVR. EMVR only reduces emissions by retiring cars not worth fixing, and its perverse incentives create risks. A salable permits policy would not create perverse incentives. It would reduce emissions of most vehicles by rewarding better driving and maintenance habits.

Though a highway congestion toll assessed electronically (no booth, no stopping) targets specific road segments, rather than vehicles most responsible for air quality deterioration, a congestion toll is a very cost-effective way to cut emissions (Harrington et al, 1994; Sisson, 1995). The technologies exist, but they have political liabilities (see Anderson and Howitt’s [1995] discussion of restrictive transportation demand management policies) like the VEF. A properly targeted congestion toll is cost-effective because air quality gains are a free side benefit. The benefits of conserving fuel, saving motorists' time, and reduced road capacity requirements are enough to justify a properly targeted toll.

Catching gross emitters with just remote sensing (violators are more rigorously tested), or I&M combined with remote sensing, may be a more politically feasible option. However, fees that vary directly with emissions create stronger, appropriate incentives than a traditional pass-fail I&M test. The centralized I&M only, pass-fail test now in use in many non-attainment areas is encountering resistance. It inconveniences all motorists, and many gross emitters stay on the road by getting waivers, or they avoid inspections by registering their vehicles outside the non-attainment area. Neglect and tampering between inspections is another major source of gross emitters (Glazer et al 1993).

EMVR lacks the political negatives of a VEF, it is technically feasible and legal now, and it may not require mandatory, universal car inspection. The major weakness of EMVR is that it bases a car’s value on something bad it would do if left in service. Contrary to the polluter pays principle that underlies most environmental policies, EMVR sponsors pay polluters not to impose uncompensated social costs. Because a clunker's EMVR value depends on the location and size of potential emissions, EMVR Programs could create perverse incentives. These include making cars dirtier, keeping them in service longer in anticipation of a sale to an EMVR sponsor, and moving dirty cars to regions with dirtier air. It could even increase the demand for cars with less efficient emission controls, or controls that decayed more quickly.

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