Mobile Source Air Pollution PDF Fall 2024

Mobile Source Air Pollution EC 434/534 University of Oregon Emmett Reynier Fall 2024 Housekeeping... 1. Problem set 3 due Friday 11/15. 2. Don't forget about your projects---come to office hours or set up a separate time to discuss with me!...

Mobile Source Air Pollution EC 434/534 University of Oregon Emmett Reynier Fall 2024 Housekeeping... 1. Problem set 3 due Friday 11/15. 2. Don't forget about your projects---come to office hours or set up a separate time to discuss with me! 2 / 38 Any news you'd like to discuss? 3 / 38 Introduction 4 / 38 What exactly is mobile air pollution? The source of the pollution is not fixed in space Pollution generated by cars, ships, airplanes, etc. Not only are mobile pollution sources more difficult to predict and control than stationary sources, they are also much more numerous. In the US: ± 27,000 major sources of stationary air pollution... Vs. over 250 million registered motor vehicles. Mobile sources are collectively responsible for a large share of O , CO , 3 2 and N O pollution. Particulate emissions also a growing concern 2 (diesel vehicles). 5 / 38 Where (and when) to regulate? Difficult to predict where a mobile source will end up over its lifetime ⟶ Makes regulation more complex than stationary sources. Regulation of mobile-source pollution involves policies aimed at both manufacturers (e.g. Ford) and drivers (you or me). Easier to control emissions at the point of production, since there are much fewer producers. But new vehicles only make up a small fraction of the whole fleet. Reducing pollution through production of new cars (e.g. new emissions standards) will take a long time time. Classic stock vs. flow problem. The timing and location are also important. Spike in pollution concentrations during traffic jams. Human exposure different in a city vs rural areas 6 / 38 Subsidies and externalities 7 / 38 Implicit subsidies Social costs of transportation tend to rise w/miles driven Private costs (e.g. insurance) do not reflect these increases. Driving an extra mile yields no private drawbacks in terms of road contruction and maintenance, i.e. P M C = 0. However, SM C > 0. Another implicit subsidy is free parking (e.g. for employees). Further incentivizes automobile travel. 8 / 38 Externalities Road users fail to bear the full costs of their choices P MC (s) diverge from SM C as traffic ↑. Social cost of accidents rises with miles driven. Exhaust fumes causes high levels of pollution inside of follower cars. 9 / 38 Consequences Implicit subsidies and externalities result in private transport costs that are too low. Too many vehicles using the road Too many trips taken Too many miles driven Too much pollution. Low transport costs also cause demand for alternative modes of transportation to be inefficiently low. Dispersed settlement patterns may not justify high volume and high fixed cost transportation alternatives (e.g. subways and lightrail). Not sufficiently incentivizing biking or walking 10 / 38 Mobile-source pollution policy in practice 11 / 38 History: The Clean Air Act (again) The CAAA of 1965 set national standards for hydrocarbon and CO 2 emissions from automobiles. The automobile industry was in favor of federal standards as a way to avoid each state passing different standards. Only California could set its own standards → the California "waiver". The CAAA of 1970 set new emissions standards that would reduce emissions by 90 percent below uncontrolled levels. Many delays and extensions for implementation followed. 12 / 38 The US approach The US approach to mobile-source pollution control has served as model for many other countries. Combines controls at the point of manufacture and emission controls at the point of vehicle use. New car emissions are regulated via a combined certification + enforcement program. Certification program tests car models from each engine type to ensure they conform to federal standards. Enforcement program includes assembly-line testing and a check of warranty provisions. Certificate may be revoked if > 40% of cars don't conform to the federal standards. (EPA can also order a recall of vehicles.) 13 / 38 Lead Phaseout Program CAA gives the EPA authority to regulate fuel additives like lead. Unleaded gasoline reduces the amount of airborne lead and protects catalytic converters EPA's CBA analysis suggested benefits of phaseout would outweight costs by a factor of 14(!) LPP operationalized through a tradeable permit system: Allowances to produce leaded gasoline were issued and then phased out rapidly Unused allowances could be sold to other refiners Primary phase-outs complete by 1986, full program ended 1987 Europe banned leaded gasoline in 2000, although some eastern European countries and Russia still allow it. 14 / 38 CAFE standards Corporate Average Fuel Economy (CAFE) standards estd. in 1975 (implemented in 1978). Original goal was related to US energy independence, but necessarily lowered emissions by targeting fuel efficiency CAFE standards require each automaker to meet miles per gallon (mpg) targets for all of its cars and trucks Based on a fleet average not per vehicle Varies with size of vehicle Standards have been steadily rising (next slide) and the goal by 2025 is 54.5 mpg Penalty = $5.50 per 1 10 mpg × Total volume of cars manufactured that year 15 / 38 CAFE standards (cont.) Source. 16 / 38 MPG illusion What's better for the environment? Replacing a Hummer H1 with a Subaru Outback? Replacing a Subaru Outback with a Toyota Prius? 17 / 38 MPG illusion Rank these old-vs-new car alternatives in terms of gas savings, based on the MPG improvement. Old → New (MPG) Perceived Rank True Rank Reduction/10,000 miles 34 → 50 18 → 28 42 → 48 16 → 20 22 → 24 Source: Larrick and Soll (2008) 18 / 38 MPG illusion Rank these old-vs-new car alternatives in terms of gas savings, based on the MPG improvement. Old → New (MPG) Perceived Rank True Rank Reduction/10,000 miles 34 → 50 1 18 → 28 2 42 → 48 3 16 → 20 4 22 → 24 5 Source: Larrick and Soll (2008) 19 / 38 MPG illusion Rank these old-vs-new car alternatives in terms of gas savings, based on the MPG improvement. Old → New (MPG) Perceived Rank True Rank Reduction/10,000 miles 34 → 50 1 3 94.1 18 → 28 2 1 198.4 42 → 48 3 5 29.8 16 → 20 4 2 125.0 22 → 24 5 4 37.9 Source: Larrick and Soll (2008) 20 / 38 MPG illusion Source: Larrick and Soll (2008) 21 / 38 MPG illusion (cont.) MPG illusion ∼ Using "miles per gallon" as a measure of fuel efficiency leads people to undervalue the benefits of replacing the most inefficient vehicles. Illusion arises because people mistakenly assume that there is a linear relationship between gas consumption (i.e. efficiency) and MPG. Only a problem in the US. In other countries, the reverse unit ordering (e.g. "litres per km") preserves the correct linear relationship. Solution: Switch to GPM ("gallons per mile"). 22 / 38 Back to the CAFE standards Two weaknesses of the fuel economy standards versus a fuel tax: 1. Focus on new vehicles means that efficiency improvements take a long time to show up in the aggregate. Up to 15 years or until all the older cars are off the roads. 2. "Rebound effect" Making something efficient (i.e. cheaper to use) makes us want to use it more often. Gains from fuel efficiency can be at least partially offset by increased driving. Austin & Dinan (2005) estimate that a flat tax of $0.30 per gallon would have achieved the same reduction in gasoline consumption at a 71% (!) lower cost. But...gas tax may not be politically feasible. 23 / 38 External benefits of CAFE standards Fuel economy standards both reduce emissions and reduce dependence on foreign oil → Spillover benefits. Should be said that energy independence for its own sake is not necessarily desirable or sensible. (Gains from trade.) However, reasonable concerns about security. Funding of terrorism (or antagonistic powers), exposure to inernational oil price fluctuations, vulnerability to cartel tactics, etc. Research suggests automakers do not provide sufficient fuel economy options (in that consumers would prefer to have better fuel efficiency). Caveats: See previous slides about the uncapitalized gains from potential efficiency upgrades (the "energy paradox") and the "rebound effect". 24 / 38 Electric vehicles and alternative fuels 25 / 38 Electric vehicles Electric vehicles (EVs) are thought of as one of the main methods to reduce emissions, but are they actually better than gasoline vehicles (GVs)? GVs: Local emissions from burning gasoline EVs: Regional emissions from electricity production "Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors" (Holland, Mansur, Muller, and Yates, AER 2016) quantify damages from both electric and gasoline vehicles. 26 / 38 Electric vehicles Damages from gasoline vehicles 27 / 38 Electric vehicles Damages from electric vehicles 28 / 38 Electric vehicles However the US has long subsidized purchases of EVs 1. Energy Improvement and Extension Act created EV tax credits in 2008 Rebate of up to $7,500 Limited to first 200k of sales for each car model added in 2009 2. Inflation Reduction Act extended subsidies in 2022 Limited to North American assembled cars Further limits on battery source/production Also excluded very expensive cars Allcott et al. (2024) have a new paper analyzing the IRA EV subsidies. 29 / 38 Electric vehicles from Allcott et al. (2024) 30 / 38 Electric vehicles Summary of IRA EV subsidy effects 1. The IRA spends $23,000 to $32,000 per incremental EV sold Only 1/3 of purchases are additional Other 2/3 would have bought EV anyways 2. The first-best policy would tax all vehicles All vehicles have negative externalities Not likely to be politically feasible 3. If GVs cannot be taxed, best to subsidize EVs to induce switch from GVs 4. Considerable heterogeneity in benefits of EVs Model-specific subsides increase benefits by $1-2.5 billion/yr 75% increase in benefits relative to uniform subsidies 31 / 38 Electric vehicles Heterogeneity in vehicle externalities 32 / 38 Biofuels Probably the most prominent alternative fuel policy at the federal level has been centered on biofuels. In the US, the G.W. Bush government made a big push for biofuels in the 2000s However, biofuels policy (especially subsidies) remain controversial Crop monoculture at the expense of natural environment Many regard it as a subsidy for big agriculture in disguise Able to take either regular petroleum gasoline/diesel or bioethanol But regular use of ethanol fell precipitously (66% → 23%) after Brazil's 2009 ethanol crisis 33 / 38 Road pricing 34 / 38 Congestion pricing Fuel taxes would need to rise substantially in order to internalize the full social cost of road transport. No impact on where emissions occur No impact on when emissions occur A better (i.e. more targeted) approach to this problem is congestion pricing → charging fees or higher prices to use more congested highways and roads. Examples: Singapore uses electronic peakhour pricing. Cars entering the city during the morning rush hour must display a sticker. Other cities use area-based congestion pricing (e.g. London). NYC recently suspended plans to implement congestion pricing 35 / 38 Other road pricing policies Public transport Fees should equal the M C of providing the service minus a subsidy that reflects the M EB of using public transport If public transport creates congestion, there should be an added fee Feebates Combine taxes on purchases of new high-emitting vehicles with subsidies for new low-emitting vehicles Obama govt's "cash for clunkers" program. Evidence on this policy has not been very positive, e.g. Hoekstra et al, 2017 Parking cash-outs Employers compensate employees who do not use a parking space Provision of free parking spaces creates a bias toward more pollution → 36 / 38 driving to work made relatively less expensive Conclusions 37 / 38 Conclusions Mobile air pollution deals cars, airplanes, ships, etc We've mostly focused on cars in this lecture There are also policies targeting other mobile sources e.g. European aviation industry is also subject to the EU ETS Mobile-source pollution is more complex than stationary-sources Added spatial and temporal complications e.g. pollution surge during traffic events Also harder to identify best policy targets e.g. Point of manufacture is easier to regulate (few participants) Doesn't touch existing stock of old cars on the road Mobile-source pollution policy bound up with other issues Energy independence, road congestion, etc Can leverage to this our advantage, but careful not use wrong/blunt instrument for a different problem 38 / 38