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Fees in an Imperfect World: An Application to Motor Vehicle Emissions

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  • Ando, Amy
  • Harrington, Winston

    ()
    (Resources for the Future)

  • McConnell, Virginia D.

    ()
    (Resources for the Future)

Abstract

This paper compares an emissions fee on measured vehicle emissions rates to a mandatory regulation that requires all vehicles to maintain emissions below a minimum standard. We model the motorist’s decision under the fee policy and simulate the fee and regulatory policies using data from an emissions inspection program that includes test and repair information for more than 50,000 vehicles. Under ideal conditions with perfect information and no subsidies, the fee on emissions rates performs substantially better than the regulatory policy. When more realistic modeling of available information and market conditions are included, there is little difference in the cost and effectiveness of the fee and regulatory programs. In particular, we find that the ability of the polluter to assess the emissions and cost outcomes of is critical importance for the performance of the fee policy.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-07-34.

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Date of creation: 06 Jun 2007
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Handle: RePEc:rff:dpaper:dp-07-34

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Related research

Keywords: pollution fees; emissions control; vehicle pollution; inspection and maintenance;

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References

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  1. Small, K.A. & Kazimi, C., 1994. "On the Costs of Air Pollution from Motor Vehicules," Papers 94-95-3, California Irvine - School of Social Sciences.
  2. Newell, Richard G & Stavins, Robert N, 2003. "Cost Heterogeneity and the Potential Savings from Market-Based Policies," Journal of Regulatory Economics, Springer, vol. 23(1), pages 43-59, January.
  3. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Econometrica, Econometric Society, vol. 73(4), pages 1367-1382, 07.
  4. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  5. Stavins, Robert, 2004. "Environmental Economics," Discussion Papers dp-04-54, Resources For the Future.
  6. Ando, Amy & Harrington, Winston & McConnell, Virginia, 1999. "Costs, Emissions Reductions and Vehicle Repair: Evidence from Arizona," Discussion Papers dp-99-23-rev, Resources For the Future.
  7. Ando, Amy & Harrington, Winston & McConnell, Virginia, 1998. "Estimating Full IM240 Emissions from Partial Test Results: Evidence from Arizona," Discussion Papers dp-98-24, Resources For the Future.
  8. Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, vol. 23(2), pages 145-65, March.
  9. Khanna, Madhu & Isik, Murat & Zilberman, David, 2002. "Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality," Agricultural Economics, Blackwell, vol. 27(2), pages 157-174, August.
  10. Cabe, Richard & Herriges, Joseph A., 1992. "The regulation of non-point-source pollution under imperfect and asymmetric information," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 134-146, March.
  11. Thomas N. Hubbard, 1998. "An Empirical Examination of Moral Hazard in the Vehicle Inspection Market," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 406-426, Summer.
  12. Fullerton, Don & West, Sarah E., 2002. "Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 135-157, January.
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