Social Cost-Benefit Analysis of Emission Norms: A Conceptual Framework

This chapter talks about the Bharat Stage emission norms VI and the need for their implementation in the automobile industry. In 2005, the Indian Government introduced an Indianized version of euro norms named Bharat stage emission standards. These norms have been abbreviated as BS-II, III, IV, VI. These norms direct automobile industries to reduce the pollutants emitted by vehicles. To confirm these norms, firms have to make specific changes in the engines’ design and other components. These changes incur production costs for the companies, which in turn impact the production quantity. All these costs lead to an increase in the overall prices of the vehicles. These indirect prices are shifted to consumers. Hence, a net social cost-benefit analysis is important for such policy decisions, and so this framework would help in gauging a major policy decision such as emission norms BSVI. This essay attempts to propose a conceptual framework for net social cost-benefit analysis in the automobile industry. Net social cost-benefit of emission norms are a combination of [(Direct Benefits + Wider impacts * (General equilibrium, Deadweight loss, Substitution effect))] -- [(Compliance Costs + Cost to Consumers * (General equilibrium + Deadweight loss + Substitution effect))]. This framework can help policymakers, analysts, and decision-makers compare the costs, benefits, and impacts of emission standards.