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Sacred Cars? Cost-Effective Regulation of Stationary and Nonstationary Pollution Sources

  • Meredith Fowlie
  • Christopher R. Knittel
  • Catherine Wolfram

For political and practical reasons, environmental regulations sometimes treat point-source polluters, such as power plants, differently from mobile-source polluters, such as vehicles. This paper measures the extent of this regulatory asymmetry in the case of nitrogen oxides (NO x), the most recalcitrant criteria air pollutant in the United States. We find significant differences in marginal abatement costs across source types: the marginal cost of reducing NO x from cars is less than half the marginal cost of reducing NO x from power plants. Our results measure the possible efficiency gains and distributional implications associated with increasing the sectoral scope of environmental regulations.(JEL Q53, Q58, R41)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.4.1.98
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Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 4 (2012)
Issue (Month): 1 (February)
Pages: 98-126

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Handle: RePEc:aea:aejpol:v:4:y:2012:i:1:p:98-126
Note: DOI: 10.1257/pol.4.1.98
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  1. McCarthy, Patrick S, 1996. "Market Price and Income Elasticities of New Vehicles Demand," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 543-47, August.
  2. Burtraw, Dallas & Palmer, Karen & Cropper, Maureen & Carlson, Curtis, 1998. "Sulfur-Dioxide Control By Electric Utilities: What Are the Gains from Trade?," Discussion Papers dp-98-44-rev, Resources For the Future.
  3. Nicholas Z. Muller & Robert Mendelsohn, 2009. "Efficient Pollution Regulation: Getting the Prices Right," American Economic Review, American Economic Association, vol. 99(5), pages 1714-39, December.
  4. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
  5. Aldy, Joseph E. & Pizer, William A., 2008. "Issues in Designing U.S. Climate Change Policy," Discussion Papers dp-08-20, Resources For the Future.
  6. Kenneth Y. Chay & Michael Greenstone, 1999. "The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession," NBER Working Papers 7442, National Bureau of Economic Research, Inc.
  7. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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