Costly Inspections and Limited Abatement: The Case of North Carolina’s I/M Program

Automobile emissions inspection and maintenance (I/M) programs are used by 31 states and Washington D.C. as well as a number of foreign counties to maintain or improve ambient air quality. Past literature provides evidence that the current design of most programs in the United States is ineffective. The efficiency of these programs, however, has yet to be analyzed. I fill a considerable gap in the literature by developing a comprehensive estimation framework to evaluate the efficiency of I/M. I use data from the North Carolina I/M program between 1999 and 2013 to estimate seven empirical models required by the framework. The costs and benefits from both I/M induced repairs and scrappage are then calculated for various regimes using different inspection frequencies and automobile exemptions. My results indicate that the North Carolina I/M program, as it existed between 1999 and 2013 was inefficient. The estimated mean benefits, costs, and net benefits were $28.5, $73.0, and -$44.5 per year respectively, in millions of June 2015 U.S. dollars. The recent increase in automobile exemptions (selective automobile targeting) in North Carolina’s program is estimated to decrease benefits and costs by 11 and 49 percent. Thus net benefits will increase by 63 percent to -$16.3 million per year. Further reductions to the scope of automobiles inspected are estimated to generate positive net benefits. For example, a regime that inspects only automobiles older than 5 years and are driven more than 20 thousand miles per year is estimated to generate net benefits of $2.13 million per year. These efficiency gains are possible because automobiles are selected for inspections based on where they sit on their emissions trajectory. Programs that fail to account for this “location” are estimated to inspect too many automobiles and yield negative net benefits.