1. Mobile Source Air Pollution Benefit from increased control is a public good and therefore, cannot be appropriated exclusively by the new-car purchases.

2. No. of vehicles – role of automobiles in the modern lifestyle – mobile source of pollution No. of vehicles – role of automobiles in the modern lifestyle – mobile source of pollution Not possible to tailor make emission rates for local pollution patterns – vehicle may be anywhere in its life Not possible to tailor make emission rates for local pollution patterns – vehicle may be anywhere in its life Stationary sources run by professionals & automobiles by amateurs Stationary sources run by professionals & automobiles by amateurs Without maintenance emission will get worse – each one is miniscule part of the problem – ozone, carbon monoxide & nitrogen monoxide Without maintenance emission will get worse – each one is miniscule part of the problem – ozone, carbon monoxide & nitrogen monoxide Producer & user can reduce pollution Producer & user can reduce pollution Easier to control small no. of producers than a large no. of users Easier to control small no. of producers than a large no. of users

3. Automobiles are durables – new vehicles a small % of total pollution controlled cars replace old vehicles slowly Automobiles are durables – new vehicles a small % of total pollution controlled cars replace old vehicles slowly Pollution cannot be always controlled at production point – as choices made by owners/drivers Pollution cannot be always controlled at production point – as choices made by owners/drivers Many types of mobiles on road - Changing mix of vehicles affects different type/ amount of emissions Many types of mobiles on road - Changing mix of vehicles affects different type/ amount of emissions Driving in urban > damage than in rural area Driving in urban > damage than in rural area Cluster emissions during peak hours – 2 peaks 2 rush hours Cluster emissions during peak hours – 2 peaks 2 rush hours Timing of emission -High concentration dangerous than low – spreading over 24 hour period could help Timing of emission -High concentration dangerous than low – spreading over 24 hour period could help

4. Economics of Mobile-Source Pollution Vehicles emit an inefficiently high level of pollution - Owners/drivers don’t bear full cost of pollution – inefficiently low cost has 2 sources: Vehicles emit an inefficiently high level of pollution - Owners/drivers don’t bear full cost of pollution – inefficiently low cost has 2 sources: A. Implicit subsidies for road transport: many types of social costs i. Road construction & maintenance costs ii. Building & maintaining parking space B. A failure to internalise external costs - externalities i. Social costs of accidents ii. Congestion - time for travel iii. Pollution inside the car

5. Congestion inefficiency Congestion inefficiency Demand $ units 0 Traffic volume to road capacity VoVo VpVp A D B C Marginal social cost Marginal private cost As traffic ↑ the flow ↓ - takes more time to travel – at this point marginal private & marginal social costs begin to diverge – impose the presence on others is the externality At V o marginal benefits (dd) = marginal social costs - drivers don’t internalise the cost of their presence when traffic is high – Vp - efficiency loss is ∆ ACD

6. Consequences Perverse incentives due to understated road transport costs – too many vehicles – too many miles driven – too many trips transport energy use high – excessive pollution Perverse incentives due to understated road transport costs – too many vehicles – too many miles driven – too many trips transport energy use high – excessive pollution Competitive modes suffer from inefficiently low demand – Competitive modes suffer from inefficiently low demand – Most destructive effect of understated transport cost is its effect on land use - low cost - find people residing away from work place & shopping – more transport is inevitable – high density travel corridors Most destructive effect of understated transport cost is its effect on land use - low cost - find people residing away from work place & shopping – more transport is inevitable – high density travel corridors

7. Policy towards Mobile Sources Smog in Southern California, Delhi, Ulaanbaatar, …. Smog in Southern California, Delhi, Ulaanbaatar, …. Clean Air Act Clean Air Act Laws in many countries – shift to CNG Laws in many countries – shift to CNG In Finland? Other countries? In Finland? Other countries? Car sharing clubs – in Switzerland & Germany – started in 1980s Car sharing clubs – in Switzerland & Germany – started in 1980s Emission standards – PUC certificates Emission standards – PUC certificates 1989: European community of 12 countries imposed emission standards – banned leaded gasoline in 2000 1989: European community of 12 countries imposed emission standards – banned leaded gasoline in 2000

8. Differentiated Regulation New sources punished by raising their costs – used car more attractive for buyers New sources punished by raising their costs – used car more attractive for buyers New cars cleaner – less & delayed emission – old cars increase consumption of oil New cars cleaner – less & delayed emission – old cars increase consumption of oil Policy makers need to find a suitable policy Policy makers need to find a suitable policy Clean Air Act – same emission standards for all cars – high emissions due to poor maintenance – timing maladjustment Clean Air Act – same emission standards for all cars – high emissions due to poor maintenance – timing maladjustment Benefits of repairs are externalities – motorists have little / no incentive to comply with requirements – ∴ enforcement Benefits of repairs are externalities – motorists have little / no incentive to comply with requirements – ∴ enforcement

9. In addition to Inspection & Maintenance programmes, Clean Air Act – amendment of 1990 required to use alternative fuels, that are cleaner - viz. oxygenated fuels in winter & reformulated gasoline round the year In addition to Inspection & Maintenance programmes, Clean Air Act – amendment of 1990 required to use alternative fuels, that are cleaner - viz. oxygenated fuels in winter & reformulated gasoline round the year 2 additives widely used: ethanol & methyl Tertiary Butyl ether (MTEB) 2 additives widely used: ethanol & methyl Tertiary Butyl ether (MTEB) Another problem: seepage – contaminating ground water & drinking water Another problem: seepage – contaminating ground water & drinking water

10. Possible Reforms Use of uniform standard – more than needed in rural area & less than needed in urban area Use of uniform standard – more than needed in rural area & less than needed in urban area At production point - emissions controlled – improved cars At production point - emissions controlled – improved cars Fuel taxes: turning to user – drivers have little incentive to ↓ emissions – to internalise social cost ↑ taxes – these taxes don’t consider when & where emissions occur Fuel taxes: turning to user – drivers have little incentive to ↓ emissions – to internalise social cost ↑ taxes – these taxes don’t consider when & where emissions occur Congestion pricing – under consideration in India Singapore: option to buy peak-off car with red licence plate & lower registration taxes - limiting number of new vehicles Congestion pricing – under consideration in India Singapore: option to buy peak-off car with red licence plate & lower registration taxes - limiting number of new vehicles Bangkok: transport of goods to metro prohibited India: no trucks to metro during restricted time Finland/US: reserved bus lanes – Italy, Oslo…. Bangkok: transport of goods to metro prohibited India: no trucks to metro during restricted time Finland/US: reserved bus lanes – Italy, Oslo….

11. Private toll roads: user’s pay the cost of maintenance of highways rather than shifting that cost to all tax- payers – recover the cost Private toll roads: user’s pay the cost of maintenance of highways rather than shifting that cost to all tax- payers – recover the cost CAFE studies:1975: more fuel for efficient vehicles CAFE studies:1975: more fuel for efficient vehicles Fleet average! Fleet average! Parking cash-outs: is it free? Should it be charged? Parking cash-outs: is it free? Should it be charged? Feebates: targeted to consumer buying new vehicles – tax for high-emitting, subsidy for low-emitting taxes  subsidies Feebates: targeted to consumer buying new vehicles – tax for high-emitting, subsidy for low-emitting taxes  subsidies PAYD insurance PAYD insurance Accelerated Retirement Strategies for older polluting vehicles – “cash for clunkers” – vehicles identified through inspection & maintenance programme or remote sensing Accelerated Retirement Strategies for older polluting vehicles – “cash for clunkers” – vehicles identified through inspection & maintenance programme or remote sensing

12. Increasingly common strategy involves limiting the days a particular vehicle can be on the road – limit the travel miles – can back fire Increasingly common strategy involves limiting the days a particular vehicle can be on the road – limit the travel miles – can back fire Mexico: banned each car from being on the road depending on the last 2 digits of the licence plate – in short-run effective – in LR the regulation was not only ineffective but also counterproductive – bought additional car Mexico: banned each car from being on the road depending on the last 2 digits of the licence plate – in short-run effective – in LR the regulation was not only ineffective but also counterproductive – bought additional car Beijing, China: even & odd number licence plates – banned half of all private vehicles from the road on week-days – ban heavy trucks form entering city during the day – many city buses run on CNG - rebates of $440 & $880 for cars & trucks for trading for the new Beijing, China: even & odd number licence plates – banned half of all private vehicles from the road on week-days – ban heavy trucks form entering city during the day – many city buses run on CNG - rebates of $440 & $880 for cars & trucks for trading for the new

13. Currently… Current policy: Emissions controlled at point-of- production & at-point-of use - Uniform emissions standards – Gram-per-mile approach in Us & Europe – have achieved but less effective in ↓ aggregate emissions & cost-effective reduction Current policy: Emissions controlled at point-of- production & at-point-of use - Uniform emissions standards – Gram-per-mile approach in Us & Europe – have achieved but less effective in ↓ aggregate emissions & cost-effective reduction Little control in highly polluted areas Little control in highly polluted areas Mixes success for inspection & maintenance strategies and accelerated retirement schemes – taxies in India – recent agitation: traffic closed for a day – too old is out now – CNG in Delhi Mixes success for inspection & maintenance strategies and accelerated retirement schemes – taxies in India – recent agitation: traffic closed for a day – too old is out now – CNG in Delhi To ensure that the social costs are borne by those making residential & mode-of-travel choices – will move in right direction To ensure that the social costs are borne by those making residential & mode-of-travel choices – will move in right direction

14. Important Insights Belief: tougher laws produce more environmental results: sanctions were so severe that authorities were unwilling to impose them Belief: tougher laws produce more environmental results: sanctions were so severe that authorities were unwilling to impose them Belief: simply applying the technical fix can solve the environmental problem - can have unintended effects – MTEB’s effect on ground water has dwarfed its positive effects Belief: simply applying the technical fix can solve the environmental problem - can have unintended effects – MTEB’s effect on ground water has dwarfed its positive effects

15. Future Control Future of mobile source air pollution – 2 new emphases are emerging : Future of mobile source air pollution – 2 new emphases are emerging : 1. Encouraging the development & commercialisation of new cleaner automotive techniques 2. Focus on influencing driver choices – bringing private marginal cost closer to social marginal cost through congestion pricing, PAYD insurance, parking pay-out Its more than simply controlling emissions – vehicle purchases, driving behaviour, fuel choice & residential and employment choices must be affected – these will transpire only if economic incentives associated with those choices are structured correctly Its more than simply controlling emissions – vehicle purchases, driving behaviour, fuel choice & residential and employment choices must be affected – these will transpire only if economic incentives associated with those choices are structured correctly