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

Amy Whritenour Ando (), Winston Harrington () and Virginia D. McConnell ()
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Winston Harrington: Resources for the Future
Virginia D. McConnell: Resources for the Future

Discussion Papers from 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.

Keywords: pollution fees; emissions control; vehicle pollution; inspection and maintenance (search for similar items in EconPapers)
JEL-codes: Q52 Q53 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Date: 2007-06-06
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Persistent link: http://EconPapers.repec.org/RePEc:rff:dpaper:dp-07-34

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