Analysis of Auto Industry and Consumer Response to Regulations and Technological Change, and Customization of Consumer Response Models in Support of AB 1493 Rulemaking: Effect of Emissions Regulation on Vehicle Attributes, Cost, and Price

This report documents the automotive industry's response to federal regulations of light duty vehicle tailpipe emissions, with the intent of identifying lessons learned that might be applicable to future regulation of greenhouse gas emissions. The focus is on 1975 and 1979-1981, when new standards took effect that led directly to the adoption of costly new emission control equipment. The costs were significant during those time periods — with almost all automakers installing new oxidation catalyst technology in the first time period and three-way catalytic converters in the second. However, prices of new vehicles did not appear to reflect the full costs of emissions control. Other cost and pricing considerations seemed to be even more important. The added compliance costs associated with emissions reduction were just one more factor used by companies in setting prices. Aggregate new car sales were affected only in a minor way by emissions regulations.