As deadlines set by the Clean Air Act Amendments of 1990 loom and pass, state and local officials are scrambling to evaluate policy options and adopt programs that will effectively reduce the motor vehicle emissions that can form ozone. Among the mandated policy options are several command-and-control approaches, some of which call for new developments in emission-control technology. But these approaches may not be as cost-effective as otlier options that rely on economic incentives. Until these economic incentives have been investigated, decision makers should be cautious about moving ahead with approaches that could have high costs, or uncertain results, or both.
With the Clean Air Act Amendments of 1970, the United States initiated a bold new approach to air pollution problems. For the most part, this approach seems to have worked, as air quality standards set as a result of the 1970 amendments have now been achieved in most locations. But ground-level ozone (smog) still remains a problem in many urban areas.
That is why the Clean Air Act Amendments of 1990 required stricter control of the emission of ozone precursors—mainly oxides of nitrogen (N0x) and volatile organic compounds (VOCs)—from stationary sources such as factories and from mobile sources such as cars and buses. But the amendments also set unrealistically short deadlines for action.
State and local officials are now hastily deciding on policies to control motor vehicle emissions and attain ambient ozone standards. Such decisions could affect the design of cars for decades to come, reshaping the entire car industry (and perhaps the oil industry) and costing motorists billions of dollars each year. Yet, it is not clear that some options for reducing motor vehicle emissions will appreciably affect ambient ozone.
In this article, we explain why many urban areas have not attained ambient ozone standards and how some of the mobile-source provisions of the latest Clean Air Act amendments share many shortcomings of their predecessors. We then present estimates of the cost-effectiveness of various options for reducing motor vehicle emissions and note the reasons to treat these estimates cautiously. We conclude by considering how policymakers could make best use of the various options and offer our views on how policies can be designed to yield the biggest "bang for the buck."
Why many urban areas still have ozone problems
One of the major reasons why ozone remains a problem is that ozone formation is complex and not well understood. Ozone is not emitted directly; rather, it is formed from precursor pollutants in a series of complex chemical reactions on hot, sunny days. This makes it difficult to relate reductions in precursors to reductions in ozone. The sources of precursors are extraordinarily numerous and, in the case of VOCs, varied; but the most important source—especially in nonattainment areas where ozone levels exceed the standard—is motor vehicles. In 1989, the Office of Technology Assessment estimated that cars, trucks, and buses contributed 45 percent of the VOCs and 30–66 percent of the NOx emissions in nonattainment areas. Recent studies suggest that these percentages may be even higher.
Rather than directly regulate the driving behavior of millions of motorists, Congress opted to target car manufacturers. In 1970, it began to set increasingly stringent emissions standards (in terms of grams of pollution per mile) for new cars, so that highly polluting vehicles would be replaced by less-polluting ones. It is estimated that these standards make the average purchase price of today's car $500 to nearly $1,200 higher than it would be in the absence of the standards.
Even though VOC emissions from new cars today are about 95 percent below what they were in the late 1960s, average emissions rates of the U.S. car fleet have not fallen by nearly this much.
The regulations themselves may have contributed to the persistence of the ozone problem. First, even though VOC emissions from new cars today are about 95 percent below those from cars in the late 1960s, average emissions rates of the U.S. car fleet have not fallen by nearly this much. This is because emissions control systems tend to break down as cars get older, causing emissions to rise. The problem is compounded by the fact that the average age of the U.S. car fleet has increased from 5.1 years in 1969 to 7.7 years in 1990. Second, the regulations have focused only on emissions rates, ignoring vehicle miles traveled (VMTs). Since 1970, VMTs have increased by 69 percent, partially offsetting reductions in emissions per mile brought about by new-car emissions standards. Third, since the standards were primarily directed at tailpipe emissions, they did not reduce emissions from fuel evaporation, which may account for 10–50 percent of total VOC emissions. Finally, the importance of NOx in ozone formation was overlooked until recently.
Additional complicating factors include rising roadway congestion over the last two decades and an increase in the average number of trips per household. Congestion increases both evaporative and tailpipe emissions, since VOC emissions rates are higher at low speeds and in stop-and-go traffic. The 22 percent rise between 1969 and 1990 in the number of car trips taken daily by the average household has also increased emissions. Trips increase emissions because a cold vehicle pollutes at a much higher rate than a warm one and because emissions are greatest during cold starts.
Clean Air Act Amendments of 1990
The Clean Air Act Amendments of 1990 continue the practice of using new-car emissions standards as the primary means for reducing overall car emissions. The amendments significantly tighten emissions rates for new cars beginning with the 1994 model year. They also allow states to adopt California's vehicle emissions standards, which are stricter than federal standards and are scheduled to become even stricter in the future.
Unlike the Clean Air Act Amendments of 1970, the 1990 amendments recognize the importance of evaporative emissions. For example, they force the U.S. Environmental Protection Agency (EPA) to establish regulations to control these emissions and require the use of reformulated gasoline in areas with the worst ozone problems. Other provisions push the frontier of automotive technology by requiring the introduction of alternative-fuel vehicles (for example, cars that run on methanol or compressed natural gas) in certain commercial and government vehicle fleets in nonattainment areas and by setting up a pilot program in California where such vehicles will be introduced to the general public.
The 1990 amendments also acknowledge the significance of the disparity between new-car and average-car emissions rates, as well as the effect of increasing VMTs on total vehicle emissions. They do this by requiring "enhanced" vehicle inspection and maintenance programs in the areas with the worst ozone problems and by requiring that local transportation plans conform to Clean Air Act goals. Above all, the 1990 amendments recognize that new-car emissions standards are not the only way to reduce motor vehicle emissions, and they leave to local and state governments many decisions about adopting alternative policies.
Despite these improvements in regulating motor vehicle emissions, the 1990 amendments still suffer from three shortcomings that will make it difficult to attain ambient ozone standards in a cost-effective manner. First, the amendments retain an excessive reliance on emissions standards and technological solutions. Second, they perpetuate EPA's practice of basing emissions-reduction estimates on its computer models rather than on empirical data, despite the fact that the estimates produced by those models can be grossly inaccurate. Third, they tend to target vehicles with either high emissions per mile or high mileage, instead of vehicles with both.
State and local officials are facing imminent deadlines to find ways of reducing the motor vehicle emissions that can form ozone. RFF Fellow Margaret A. Walls, shown addressing a recent meeting of the RFF council, is one of the RFF researchers studying transportation options to improve air quality
Despite improvements in regulating motor vehicle emissions, the 1990 amendments still suffer from shortcomings that will make it difficult to attain ambient ozone standards in a cost-effective manner
Because the 1990 amendments set imminent deadlines for attaining ambient ozone standards, they could lead states into hasty and expensive decisions. For example, in February 1994, the Ozone Transport Commission, which coordinates air quality decisions in the northeastern states, requested EPA's permission to adopt California's vehicle emissions standards.
Cost-effectiveness of various options
The 1990 amendments give local areas flexibility to choose among many ways to reduce vehicle emissions. But which approaches to choose? How can state and local officials avoid costly efforts with uncertain results?
One way of evaluating policy options is to estimate the cost-effectiveness of each policy—that is, the cost in dollars per ton of pollutant reduced—and then compare the estimates. With such information, states presumably could adopt the low-cost options first. Various groups, including Resources for the Future (RFF), have studied the cost-effectiveness of individual policy options in reducing the emission of VOCs, and our analysis of these studies is summarized here (see table, right). The cost-effectiveness of these approaches varies greatly, from $1,650 per ton of VOCs reduced for emissions-based vehicle registration fees to $29,000–$108,000 for electric vehicles. In general, EPA considers any approach that costs less than $5,000 per ton of emissions reduced to be highly cost-effective. Options that reduce VOCs for less than $10,000 per ton are still considered reasonable.
The emissions-reduction options we consider here can be divided into two types. The first type is command-and-control approaches that set emissions standards or that specify emission-control technologies. The second type is economic-incentive approaches that change prices (such as car purchase prices and gasoline prices) and thereby lead motorists to make decisions that reduce vehicle emissions. For our analysis, we compared options of both types.
Command-and-control approaches include the mandated use of reformulated gasoline, the creation of enhanced inspection and maintenance (I&M) programs, and the replacement of gasoline vehicles by alternative-fuel vehicles. We considered these three approaches, which are required by the 1990 amendments in some nonattainment areas. We also analyzed the group of low-emission vehicles mandated by California.
Reformulated gasoline may be one of the cheaper options for reducing VOCs, according to EPA's estimate of its cost-effectiveness. The overall emissions reductions from reformulated gasoline are small, however.
According to RFF estimates, I&M programs are somewhat more expensive, but they may yield larger emissions reductions. The enhanced I&M program mandated by EPA requires that a new, more accurate, but also more expensive, tailpipe-emissions test be used and that inspections be performed at centralized facilities that only test vehicles, rather than at service stations that both test and repair vehicles. Alternative I&M programs include remote sensing, which uses roadside monitoring and detection devices to measure vehicle emissions, and "hybrid" programs, which employ remote sensing but also subject vehicles to enhanced I&M every two to four years.
Estimates of the cost-effectiveness of alternative approaches to reducing motor vehicle emissions (in $ per ton of VOCs reduced)
Alternative-fuel vehicles, according to RFF estimates, are a very expensive option for reducing VOCs. Policies that require these vehicles are poorly targeted because they ignore emissions from vehicles already on the road. Moreover, such policies might cause car manufacturers to increase the price of all vehicles so that they can cover the cost of producing alternative-fuel vehicles. If so, motorists might choose to keep their old vehicles rather than purchase new, less-polluting ones. These problems may be compounded if states adopt California's phasedown to "ultra-low-emission vehicles" and "zero-emission vehicles."
One of the problems with command-and-control approaches to regulating motor vehicle emissions is that they are targeted to reduce emissions rates instead of total emissions. The variability in vehicle use makes emission-rate regulation less promising than regulations targeted at both emissions rates and mileage. (For example, vehicles driven more than 25,000 miles per year make up only 10 percent of all motor vehicles yet account for 30 percent of the total VMTs.)
Because the command-and-control approaches that we studied rely on emissions standards and technological solutions, they are not, in general, as potentially cost-effective as approaches that are well-targeted and rely on economic incentives. Economic-incentive approaches include accelerated vehicle-retirement (AVR) programs, gasoline taxes, and vehicle registration fees based on emissions rates.
According to RFF estimates, AVR programs and a gas-tax increase of 4.3 cents per gallon reduce VOCs at about the same cost per ton as I&M programs, but both approaches may yield only limited total emissions reductions. AVR programs are not well targeted since the cars they take off the road have at most only a few years of life remaining. AVR programs will not substantially reduce car emissions unless the programs are large scale, in which case their cost-effectiveness decreases (see "Will Speeding the Retirement of Old Cars Improve Air Quality?" on p.7).
Gas-tax increases are poorly targeted as a means to reduce VOC emissions because they discourage the use of all cars, not just the most-polluting ones. Furthermore, a large tax increase could lead consumers to purchase cars with greater fuel efficiency—behavior that could offset emissions reductions in the long run. Gasoline taxes nonetheless would be an incentive for energy conservation and therefore lead to reductions in emissions of carbon dioxide and other "greenhouse" gases.
Vehicle registration fees based on emissions rates appear much more promising. Unlike new-car emissions standards, these fees target emissions from all vehicles on the road. They also give motorists the proper incentives to maintain (or scrap) their vehicles, since the fee would be higher for a car that pollutes more. Based on a recent preliminary analysis of such fees, we conclude that they are more cost-effective than the other options examined here. Again, we note that there are inefficiencies in approaches that reduce emissions rates rather than total emissions. In the context of emissions-based registration fees, cars that have different emissions per mile would be charged different fees even when their mileages are such that their total emissions levels are the same.
In general, EPA considers any approach that costs less than $5,000 per ton of emissions reduced to be highly cost-effective; options that reduce VOCs for less than $10,000 per ton are still considered reasonable.
By the EPA benchmarks of $5,000 and $10,000 per ton of VOCs reduced, reformulated gasoline, I&M programs, AVR programs, gas taxes, and, in particular, emissions-based vehicle registration fees all appear to be attractive. In contrast, alternative-fuel vehicles and the low-emission vehicles mandated by California appear to be very unattractive.
Caveats
Estimates of the cost-effectiveness of all these options should be interpreted cautiously for several reasons. First, the true cost-effectiveness of any particular option depends on previously implemented options. For example, an I&M program might be less cost-effective if it were implemented after the use of reformulated gasoline than if it were implemented beforehand.
Second, policies that cost-effectively reduce VOCs—for example, accelerated vehicle-retirement and reformulated gasoline—are not necessarily effective at reducing NOx. In some areas of the country, NOx reduction is essential for ozone improvements.
Third, uncertainty pervades the emissions-reduction estimates on which calculations of cost-effectiveness are based, and often analysts resort to "best case" outcomes. For example, the estimates for EPA's enhanced I&M program assume that cars identified as high emitters are successfully repaired, but repairs have often been ineffective. In one study, more than half of all vehicles that underwent repairs to reduce emissions had greater emissions afterwards!
Fourth, some of the cost estimates are also highly uncertain, particularly those for alternative-fuel vehicles and the low-emission vehicles mandated by California. Some observers believe that technological advances could greatly reduce costs; in the case of alternative-fuel vehicles, however, we feel that it is highly unlikely that any such advances are imminent.
Toward more efficient and effective policy
To ensure that policies to reduce motor vehicle emissions are cost-effective, we must design them with three characteristics in mind. First, we should target policies as precisely as possible to reduce total emissions, rather than emissions per mile, in those places and at those times when ozone creation is at its peak. Second, we must design policies that give motorists incentives consistent with pollution reduction. Third, to the extent possible, we must measure performance on the basis of actual emissions rather than on estimates from computer models.
None of the options considered here is ideal with respect to all three of these characteristics, but each could be improved with relatively minor changes. For example, I&M programs might be more cost-effective if they went after only the very dirtiest vehicles, which tend to be the easiest to detect as well as the most likely to be effectively repaired. Targeting the very high polluters also might mean that a simpler, less costly emissions test could be used instead of the new emissions test developed and promoted by EPA.
Instead of reducing all VMTs through a gasoline tax, better approaches would include congestion pricing of roadways and downtown parking taxes. Though not targeted at high-polluting vehicles, these options can be targeted to areas with ozone problems, and they have the substantial advantage of reducing traffic congestion.
Emissions-based vehicle registration fees appear to be very cost-effective, and, unlike many of the policies considered here, the potential emissions reductions could be made almost as large as desired simply by raising the fee. This policy could be better targeted and thus even more cost-effective if it were based on a car's estimated total emissions during peak ozone periods. This would require information about the car's average emissions rates and its mileage in particular locations at particular times. Here, remote sensing could be valuable.
None of the options considered here is ideal, but each could be improved with relatively minor changes.
Mobile remote-sensing units make it relatively inexpensive to measure car emissions when ground-level ozone is at its peak. A program that uses these units could require motorists to pay high registration fees when their cars' average emissions rates—based on several sensor readings—rise above a certain level. Such a program could target total emissions, not just emissions rates, by setting a high fee for cars that not only have high emissions but also pass by the sensors many times.
To reach its full potential, an emissions-based vehicle registration fee should reflect mileage during peak ozone periods as well as emissions rates—information that might require the use of remote sensing devices, such as this one, which can be set up along roadways
Remote-sensing devices, however, cannot monitor evaporative emissions, and they are difficult or impossible to use in bad weather. In addition, there may be questions about whether the measured emissions faithfully represent the average performance of cars.
Emissions-based registration fees are promising, but they may encounter the same attitudes that economic instruments for environmental policies always seem to face, including skepticism about their effects on pollution and concern about equity. Nonetheless, the tide in environmental policy has been shifting toward such instruments. Perhaps the time is right for their application to mobile-source emissions control.
Recommendations
The most economically attractive ways of reducing motor vehicle emissions would be directed at cars already on the road and would require extensive use of economic incentives. Emissions-based registration fees hold much promise. Such a policy could achieve substantial emissions reductions at relatively low cost even if based only on emissions rates as determined by a conventional emissions test. To reach its full potential, however, an emissions-based registration fee should reflect mileage during peak ozone periods as well as emissions rates. This may require the use of remote sensing. Further investigation of remote sensing to deal with the real—or to lay to rest the perceived—problems associated with that technology is warranted.
Until emissions-based registration fees and other economic-incentive approaches are investigated, it would be a serious mistake for states to commit themselves prematurely to command-and-control approaches, which may prove to be costly, ineffective, and difficult to back away from. Thus, while I&M programs are promising because they target emissions from all cars (not just new cars), we should avoid a nationally mandated, uniform I&M program until we gather data from demonstration programs.
Until some of the other, cheaper alternatives have been investigated, it would be premature for the rest of the country to adopt California's new-car emissions standards. Given great uncertainty and dubious benefits about the costs of new types of low-emission vehicles, it seems wise to let California experiment with these cars by itself. If the costs prove low, then the kinds of economic policies we advocate will bring them to market, thus achieving the emissions-reduction goals of the California vehicle program but without legislative fiat.
Winston Harrington is a senior fellow in the Quality of the Environment Division and Margaret A. Walls is a fellow in the Energy and Natural Resources Division at Resources for the Future. The issues in this article are detailed in discussion paper 94-26, "Shifting Gears: New Directions for Cars and Clean Air" by Winston Harrington, Margaret A. Walls, and Virginia D. McConnell.
A version of this article appeared in print in the May 1994 issue of Resources magazine.
A version of this article appeared in print in the May 1994 issue of Resources magazine.
