Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient?

Mark R. Jacobsen, James M. Sallee, Joseph S. Shapiro and Arthur A. van Benthem

No 30702, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The world has 1.4 billion passenger vehicles. How should governments regulate their air pollution emissions? A Pigouvian tax is technologically infeasible. Most countries instead rely on exhaust standards that limit air pollution emissions per mile for new vehicles. We assess the effectiveness and efficiency of these standards, which are the centerpiece of US Clean Air Act regulation of transportation, and counterfactual policies. We show that the air pollution emissions per mile of new US vehicles has fallen spectacularly, by over 99 percent, since standards began in 1967. Several research designs with a half century of data suggest that exhaust standards have caused most of this decline. Yet exhaust standards are not cost-effective in part because they fail to encourage scrap of older vehicles, which account for the majority of emissions. To study counterfactual policies, we develop an analytical and a quantitative model of the vehicle fleet. Analysis of these models suggests that tighter exhaust standards increase social welfare and that increasing registration fees on dirty vehicles yields even larger gains by accelerating scrap, though both reforms have complex effects on inequality.

JEL-codes: H21 H23 H7 Q5 Q50 R4 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-ene, nep-env and nep-tre
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Published as Mark R Jacobsen & James M Sallee & Joseph S Shapiro & Arthur A van Benthem, 2023. "Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient?," The Quarterly Journal of Economics, vol 138(3), pages 1907-1976.

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Related works:
Journal Article: Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient? (2023)
Working Paper: Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient? (2023)
Working Paper: Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient? (2022)
Working Paper: Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient? (2022)
Working Paper: Regulating Untaxable Externalities: Are Vehicle Air Pollution Standards Effective and Efficient? (2022)
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