Abstract: New Corporate Average Fuel Economy (CAFE) standards were recently passed in the United States with the twin goals of reducing greenhouse gas emissions and oil use. The new standards represent a dramatic change from recent policy. This paper examines the key features of the new rules, and compares them to previous CAFE standards in terms of flexibility and structure. The importance of consumer preferences and market forces on CAFE outcomes are identified. In the second part of the paper, the perspective of the consumer is explored. Consumer assessments of fuel economy savings with more fuel-efficient vehicles may be biased or incomplete, leading many to argue that there is an “energy efficiency gap” in consumer demand for vehicles. Reasons for such a gap, such as market failures, behavioral responses, and market barriers, are summarized. The implications for policy are discussed, including the role of combining CAFE with other policies.

Abstract: This paper develops a model of land use in a growing community on the urban fringe and uses it to explore the spatial patterns and time path of development. The model is an agent-based model (ABM) of housing and land markets that includes as agents farmer/landowners, a developer who buys land and builds houses, and consumers who purchase housing. Housing is characterized by lot size and house size. As in all ABMs, macro-scale patterns emerge from many micro-scale interactions between individual agents, which are modeled computationally. In contrast to many other ABMs, however, the fundamentals of microeconomic decisionmaking are built into the model—consumers choose houses to maximize utility; farmers compare returns from agriculture to the expected value of their land in development; and developers purchase land and build houses so as to maximize profits. Model simulations reveal some aspects of sprawl such as “leapfrog” development, yet also confirm some results from traditional urban economic models, such as declining density and rent (land price) gradients. Sensitivity analyses on the utility function parameters, the distribution of agricultural productivity, and the travel costs highlight the importance of the economic features of the model.

Abstract: This paper uses an economic agent-based model of land use in a hypothetical urban fringe community to examine the effects of large-lot zoning on land conversion, land prices, and the spatial configuration and density of new development. The model incorporates the actions of heterogeneous housing consumers, developers, and farmer/landowners who make economic decisions in land and housing markets. The model allows for population growth and simulates the evolution of land use patterns and prices over a 20-year time period. Zoning regulations in the form of minimum lot size restrictions imposed in an outlying area are shown to have effects that vary with the stringency of the regulations: 2-acre minimum lot sizes have little effect on the spatial patterns of development, but they do increase land and housing prices and result in higher incomes in the region; 5-acre minimum lot sizes push development toward the city center, leaving agricultural land in the zoned region undeveloped until quite late in the simulation period. While house prices are higher with 5-acre zoning, land prices in the zoned region fall, highlighting the countervailing influences of lot size restrictions on land prices. The new modeling approach allows for the tracking of the transitional dynamics of development, both over space and time as the urban area grows.

Abstract: This paper suggests a cause of low density in urban development or urban sprawl that has not been given much attention in the literature. There have been a number of arguments put forward for market failures that may account for urban sprawl, including incomplete pricing of infrastructure, environmental externalities, and unpriced congestion. The problem analyzed here is that urban growth creates benefits for an entire urban area, but the costs of growth are borne by individual neighborhoods. An externality problem arises because existing residents perceive the costs associated with the new residents locating in their neighborhoods, but not the full benefits of new entrants which accrue to the city as a whole. The result is that existing residents have an incentive to block new residents to their neighborhoods, resulting in cities that are less dense than is optimal, or too spread out. The paper models several different types of urban growth, and examines the optimal and local choice outcomes under each type. In the first model, population growth is endogenous and the physical limits of the city are fixed. The second model examines the case in which population growth in the region is given, but the city boundary is allowed to vary. We show that in both cases the city will tend to be larger and less dense than is optimal. In each, we examine the sensitivity of the model to the number of neighborhoods and to the size of infrastructure and transportation costs. Finally, we examine optimal subsidies and see how they compare to current policies such as impact fees on new development.

Abstract: This paper explores the different perspectives on infill development and its role in urban growth. Despite the intense debate about the potential for and effects of infill development, there is very littleempirical evidence about whether policies to promote it have been effective, about the amount and type of infill development and its effect on surrounding communities. This paper first reviews arguments from both the planning and economics literature on the possible benefits and costs of infill development and the effectiveness of policies to promote it. Then, we summarize the different approaches to measuring infill and provide evidence about the amount of infill that has occurred relative to other development. We also investigate infill characteristics and how its density and size may be different from the development in existing neighborhoods where it is located. Finally, we review the empirical literature on the effects of infill on property values in receiving communities, drawing out implications for policy and suggesting directions for future research.

Abstract: The paper explores a number of issues related to lot size and urban density. First, trends in single-family residential lot size over the past 35 years are examined in eight counties in the state of Maryland. We find that there was a trend toward larger lot sizes in many suburban counties in the mid to late 1990s, and that there has been a general flattening of the density gradient in urban areas over the last few decades. We then examine the extent to which lot size is being constrained by regulation by comparing actual subdivision density to the allowable density under zoning rules. This analysis is done for three counties with different degrees of suburbanization. We find that only in the areas with the very large lot zoning does zoning seem to be constraining actual lots size. There is a good deal of excess capacity in the density that could be built, especially in the more densely zoned areas. Finally, recognizing that households have preferences for lot size and other housing characteristics, we provide some evidence about the strength of household preferences over lot size and their willingness to trade off lot size for other characteristics.

Abstract: In many communities on the urban–rural fringe, subdivisions are subject to “clustering” rules, in which houses must be located on a portion of the total land area and the remainder of the land is left as open space. This open space may be undisturbed forest or pastureland, or it may include recreation facilities and trails. In some communities, the open space may remain in agricultural use as pasture or cropland. Although the open space may provide benefits to subdivision residents, it means that those residents are living in a higher-density setting than people living in conventional subdivisions. It is unclear whether the benefits offset the loss experienced by smaller lots and higher density. This trade-off is the focus of our study. We use data on subdivision house sales occurring between 1981 and 2001 in a county on the fringe of the Washington, DC, metropolitan area to estimate a hedonic price model. We examine how households value being adjacent to open space and having more open space in the subdivision, and how they may be willing to trade off those amenities with their own private lot space. We find that private acreage matters to households—a 10 percent larger lot leads to about a 0.6 percent higher house price, all else being equal. Subdivision open space is also valuable to households, but the marginal effect is much smaller than the marginal effect of private lot space. We also find that subdivision open space does substitute for private land, but the extent of the trade-off is small. We use the results of the estimated hedonic model to simulate the effects on prices of jointly increasing open space and reducing average lot size, holding the size of the subdivision constant. We find that average house prices are lower with clustering, particularly for interior lots that are not adjacent to open space.

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.

Abstract: Many economists see current land use patterns as inefficient due to various market failures, and planners argue that current patterns do not follow sound planning practice. One policy of interest to both groups is transferable development rights (TDR). TDRs allow the development rights from land that is preserved in an undeveloped state to be transferred to other areas where development can be made denser. This paper addresses one of the greatest difficulties TDR programs face—insufficient demand. We develop a simple theoretical model and estimate a TDR demand function using data from Calvert County, Maryland, one of the only regions where data on individual sales are available. We find that baseline zoning is a critical determinant of TDR demand—demand is high in low-density rural areas but not in the relatively high-density residential areas. We also identify many subdivision characteristics that are significant in explaining TDR use.

Abstract: Many communities on the urban fringe are implementing a range of policies to preserve farmlandand open space, cluster residential development, and guide development to areas with existinginfrastructure. These efforts are an attempt to control overall growth and the concomitant loss in openspace and also to counter a trend toward the so-called large lot development that often takes place in theseareas. Planners have argued that policies to manage density are the most important local policy focus forurban areas in the coming years.It is possible that large lot development and sprawl are themselves the result of governmentpolicy. Most local governments use zoning to establish minimum acreage requirements for eachresidential dwelling unit; in ex-urban localities, these limits are often quite high. Developers might build asubdivision with average lot sizes greater than the minimum but they cannot by law go below it. Someresearchers have argued, however, that the spatial patterns of development are simply the natural result ofhousehold preferences and market forces.In this paper, we address the question of whether zoning limits are the primary cause of lowdensity,sprawling development or whether market forces tend to dictate this outcome. If zoning limitsaccount for low-density development in at least some cases, how would development patterns be differentif there had been no such rules? We begin by constructing a simple model of the developer decision aboutthe density of new development. The subdivision is the unit of observation, and developers must weighboth demand and cost considerations in choosing density, in addition to complying with zoningrestrictions that vary across parcels. We apply the model using parcel-level data from a region wherezoning rules vary but are exogenous to the period under study. Calvert County, Maryland, nearWashington, DC, is an historically rural county that has experienced rapid growth in recent years. Thecounty has a transferable development rights (TDRs) program that has led to a great deal of variability inthe intensity of development across properties. We are able to not only examine the extent to whichzoning has contributed to large lot development but also to determine the economic forces that underliedensity decisions. Finally, we are able to forecast how density would have been different in the absence ofzoning rules by estimating a Tobit equation that is censored for the observations constrained by zoning.

Abstract: AbstractThe activities conducted on land surrounding the Chesapeake Bay directly affect pollution levels in the Bay, and they do so in complex and varied ways. Policy attention has been focused, for the most part, on modifying these activities within a particular land use category but not on wholesale changes in land use. For example, farmers are encouraged to use “best management practices” (BMPs) that focus on fertilizer use, crop covers, and the like; residential and commercial developers are encouraged to manage stormwater runoff; and wastewater treatment plants are required to meet technology-based standards. But the amount of land in urbanized uses relative to the amount in farming, forestry, and open space has not been given the attention it deserves. In this paper, we discuss the ways that land use affects pollution in the Bay. We then analyze three economic incentive-based policies that could be used to alter land use patterns—purchase of development rights (PDRs), transferable development rights (TDRs), and development impact fees. The strengths and weaknesses of each policy are discussed. Finally, we discuss the issue of policy coordination, i.e., synchronizing policies focused directly on land use, such as TDRs, with input-based taxes. More research on this important policy issue is needed.

Abstract: Transferable development rights (TDRs) can be used as a local planning tool to preserve land for particular uses. TDRs separate ownership of the right to develop land from ownership of the land itself, creating a market in which the development rights can be bought and sold. Landowners who sell TDRs permanently preserve their land in an undeveloped state; those TDRs are then used to increase the density of development elsewhere. In this paper, we evaluate a TDR program for preserving farmland in Calvert County, Maryland. We evaluate the performance of the TDR market over the 23-year life of the program by looking at the number of transactions and TDRs sold and the level and dispersion of prices over time. We also look closely at the influence of the county government as a participant in the market. We locate the properties that have been preserved in the county as well as the subdivisions that have used TDRs to increase the density of development. We find that the program is achieving Calvert’s farmland preservation goals and the TDR market appears to have operated efficiently, at least since 1993 when the county increased its role in the TDR market. At that time, the county began purchasing a small number of development rights each year at a fixed and known price and also began publishing a newsletter providing information about the program. These actions stabilized prices and appear to have bolstered participants’ faith in the longevity of the program. Most of the agricultural properties preserved in the program are in areas less profitable for development. The demand for TDRs to increase density is greatest in subdivisions in the northern part of the county, closer to the major urban cities, and interestingly, in relatively rural areas with lowdensity zoning. There appears to be little demand for TDRs and the associated higher density in town centers or areas zoned with residential zoning.

Abstract:

Reducing nitrogen oxide (NO_x) emissions in the eastern United States has become the focus of efforts to meet ozone air quality goals and will be useful for reducing particulate matter (PM) concentrations in the future. This paper addresses many aspects of the debate over the appropriate approach for obtaining reductions in NO_x emissions from point sources beyond those called for in the Clean Air Act Amendments of 1990. Data on NO_x control technologies and their associated costs, spatial models linking NO_x emissions and air quality, and benefit estimates of the health effects of changes in ozone and PM concentrations are combined to allow an analysis of alternative policies in thirteen states in the eastern United States. The first part of the study examines the cost and other consequences of a command-and-control approach embodied in the Environmental Protection Agency’s (EPA) NO_x SIP call, which envisions large reductions in NO_x from electric utilities and other point sources. These results are compared to the alternative policy of ton-for-ton NO_x emissions trading, similar to that proposed by the EPA for utilities. We find that emission reduction targets can be met at roughly 50% cost savings under a trading program when there are no transaction costs.

The paper examines a number of alternative economic incentive policies that have the potential to improve upon the utility NO_x trading plan proposed by EPA, including incorporation of other point sources in the trading program, incorporation of ancillary PM benefits to ozone reductions in the trading program, and trading on the basis of ozone exposures that incorporates the spatial impact of emissions on ozone levels. For the latter analysis, we examine spatially differentiated permit systems for reducing ozone exposures under different and uncertain meteorological conditions, including an empirical analysis of the trade-off between the reliability (or degree of certainty) of meeting ozone exposure reduction targets and the cost of NO_x control. Finally, several policies that combine costs and health benefits from both ozone and PM reductions are compared to command-and-control and single-pollutant trading policies. The first of these is a full multipollutant trading system that achieves a health benefit goal, with the interpollutant trading ratios governed by the ratio of unit health benefits of ozone and PM. Then, a model that maximizes aggregate benefits from both ozone and PM exposure reductions net of the costs of NO_x controls is estimated.

EPA’s program appears to be reasonably cost-effective compared to all of the other more complex trading programs we examined. It may even be considered an optimal policy that maximizes net aggregate benefits if the high estimate of benefits is used in which mortality risk is linked to ozone exposure. Without this controversial assumption, however, we find that EPA’s NO_x reduction target is far too large.

Abstract: Using data from 1995 and 1996, the authors of this paper estimate the cost of the Arizona Enhanced I/M Program and the emission reductions achieved. They begin by enumerating briefly the components of I/M costs and discuss their size and incidence. Then they describe the empirical information from Arizona and how they use it to construct cost estimates for both vehicle inspection and repair of failing vehicles. Inspection costs include the costs of operating the test stations and the costs motorists incur in time and money to get to the station and go through the testing process. The authors find that the inspection costs account for over two-thirds of the full costs of I/M, while costs associated with actual vehicle repair account for only one third. They conclude by comparing the empirical estimates of costs and program effectiveness in the Arizona program with the ex ante estimated Enhanced I/M program costs made by the EPA in the 1992 Regulatory Impact Analysis (RIA). The ex ante EPA analysis appears to have underestimated the costs of achieving the ambitious reductions in emissions hoped for under I/M.

Abstract: The Arizona I/M program provides one of the first opportunities to examine the costs and effectiveness of vehicle emission repair. This paper examines various aspects of emission reductions, fuel economy improvements, and costs of repair, drawing data from over 80,000 vehicles failing the I/M test in Arizona between 1995 and the first half of 1996. We summarize the wealth of repair data from the Arizona program and highlight its limitations. Because missing or incomplete cost information has been a serious shortcoming for evaluation of I/M programs, we develop a method for estimating the costs of repair when those costs are not reported. We find surprising evidence that almost one quarter of all vehicles that take the I/M test are never observed to pass the test. Using a statistical analysis, we provide some information about the differences between the vehicles that pass and those that do not. Older, more polluting vehicles are much more likely to never pass the I/M test, and their expected costs of repair are much higher than those of new cars. The paper summarizes the evidence on cost and emission reduction in the Arizona program, comparing costs and emission reductions for both cars and trucks. Finally, we examine the potential for more cost-effective repair, first through an analysis of tightening I/M cutpoints, and then by calculating the cost savings of achieving different emission reduction goals when the most cost effective repairs are made first.

Abstract: This paper examines the current assignment of liability for in-use vehicle emissions and suggests some alternative policies that may reduce the cost and increase the effectiveness. The authors first discuss the cost, performance and incentives under current Inspection and Maintenance (I/M) programs, using the recently implemented Arizona "Enhanced I/M" program as an example. These programs were designed to identify and repair vehicles with malfunctioning emission control systems. Since their inception, however, I/M programs have been plagued by transaction costs that have drastically raised the cost of I/M as well as limited its effectiveness. These transaction costs fall into three categories: emission monitoring, repair avoidance, and non-transferability of emission reductions. The authors argue that most of these transaction costs can be attributed to the current assignment of liability for I/M to motorists, and they examine the potential for other liability assignments to reduce transaction costs and improve program efficiency. Among the alternative institutional arrangements discussed are greater imposition of liability on manufacturers, emission repair subsidies, repair liability auctions, and vehicle leasing.

Abstract:

This paper examines the behavioral and stochastic aspects of modeling emission reductions from vehicle Inspection and Maintenance (I/M) programs. Forecasts of the potential emission reductions from such programs have been modeled by the use of the Environmental Protection Agency's MOBILE Model, EPA's computer model for estimating emission factors for mobile sources. We examine the structure of this Model and review the way behavior of drivers, mechanics and state regulatory authorities is incorporated in the current generation of the Model. We focus particularly on assumptions about vehicle repair under I/M, compliance with I/M requirements, and the impact of test measurement error on predicted I/M effectiveness. We also include some preliminary comparisons of the Model's outcomes to results of the I/M program in place in Arizona. Finally, we perform some sensitivity analyses to determine the most influential underlying parameters of the Model.

We find that many of the assumptions of the I/M component of the Model are based on relatively small data sets on vehicle done in a laboratory setting, and that the output of the Model makes it difficult to compare the results against real world data from on-going state programs. In addition, the Model assumes that vehicles will either be repaired or receive a waiver. In the Arizona program there appears to be a third category of vehicles — those which fail the test and do not receive passes. This share may be as high as a third of all failing vehicles. Vehicles which do not eventually pass the test would be treated in the Model as non-compliant. However, in current programs, states do not seem to be measuring and entering the compliance rate correctly. The paper also examines the evidence about whether emissions deteriorate over the life of vehicle in a grams per mile basis (as assumed by the Model) or a grams per gallon basis. It finds support for the argument that emissions deteriorate on a grams per gallon basis.

We find through sensitivity analysis that the repair effectiveness assumed by the Model to occur in an IM240 test are much greater than for the idle test, and that identification rates and repair effectiveness vary a great deal according to the cutpoint. These results are based on small numbers of vehicle tests in a laboratory setting and could be compared to real world evidence. Examining costs and cost-effectiveness of variations in I/M programs is important for determining improvements in I/M programs. States may not have incentives to develop cost-effective programs based on current Model that forecast emission reduction "credits" that are overly optimistic.

Abstract:

Nitrogen oxide emissions not only affect air quality but have recently been found to be an important source of nitrate pollution in the Chesapeake Bay. This analysis examines the costs, emissions, source-specific and location-specific allocations of NO_X emissions reductions and the ancillary ozone related health benefits under a range of policy scenarios. The paper includes analysis of three separate policies. The first is a detailed analysis of the effect on nitrate loadings to the Bay of command and control policies specified in the Clean Air Act and as part of the OTAG process. The second is a comparison of alternative scenarios for reducing NO_X emissions that meet nitrate loading goals, with or without concern for reducing ozone concentrations and the health effects they cause. The third is a comparison of alternative approaches to allocate NO_X emissions to meet NO_X reduction and ozone exposure goals while capturing the ancillary effect on nitrate loadings. This last analysis focuses on the stake the Bay jurisdictions have in the outcome of negotiations over NO_X trading programs being developed by EPA for reducing ozone in the Eastern U.S. With the primary focus on the Chesapeake Bay jurisdiction, all three analyses integrate the ancillary ozone benefits of policies to reduce nitrate pollution, including examination of how these ancillary benefits change under alternative meteorological episodes, and explore lower cost alternatives to current regulatory programs in both qualitative and quantitative terms.

We find that the Chesapeake Bay benefits from efforts to reduce NO_X emissions to meet the ambient air quality standard for ozone. Airborne NO_X emission reductions slated to occur under the Clean Air Act in the Bay airshed will reduce nitrate loadings to the Bay by about 27 percent of the baseline airborne levels. The additional controls of NO_X contemplated in what we term the OTAG scenario is estimated to result in an additional 20 percent reduction from this baseline. However, the paper's analysis of possible least cost options shows that the costs of obtaining such reductions can be significantly reduced by rearranging the allocation of emissions reductions to take advantage of source-type and locational considerations. In addition, we find that adding consideration of ancillary ozone-related health benefits to the picture does not alter any qualitative conclusions. Quantitatively, unless a link between ozone and mortality risk is assumed, the benefits are too small to affect the cost-saving allocations of NO_X reductions. If the case for such a link can be made, the results change dramatically, with large overall increases in NO_X reductions and a relative shift in controls to non-Bay states and utility sources. These specific effects are sensitive to the source-receptor coefficients linking NO_X to ozone, however.

Our analyses also suggest that the Bay jurisdictions have a stake in the outcome of the NO_X trading debate -- that some trading designs can lead to better outcomes for these jurisdictions than others. Nevertheless, a common feature of cost-savings policies is that they both rearrange emissions reductions and, in the aggregate, reduce emissions less than a command and control system. Thus, some trading regimes result in significantly smaller loadings reductions (up to 25 percent smaller) than the command and control approach.

Abstract: This paper incorporates owners' decisions to keep, repair or scrap their old vehicles into a simulation model of fleet emissions. This decision depends critically on the owner's perceived value of the vehicle, so we examine the factors affecting owners' valuations of their old vehicles using a unique longitudinal dataset. Willingness to accept for the vehicle is well predicted by mileage and condition of the car, and declines systematically with its age. Our estimated model of vehicle value is used as an input into a simulation model of a 1,000-car fleet representative of California's fleet. Other inputs into the simulation models are the estimated distributions of emissions in the fleet, and two equations that link emissions reductions to the cost of repairs. The simulation model is used to examine the role of scrap policies alone and combined with other policies for reducing emissions, such as current I/M programs and proposed emissions fees, and the welfare implications of combining such programs. The model incorporates both technical and behavioral relationships, and assumes that of all possible options (repairing the car, scrapping the vehicle, or paying the emissions fee without repairing the vehicle) the owner chooses the one with the least cost. We find that old car scrap programs may increase net welfare under a regulatory program like I/M in practice today, but that a stand alone scrap program is unlikely to provide very much in the way of emission reductions.

Abstract: The expense and inconvenience of enhanced vehicle emissions testing using the full 240-second dynamometer test has led states to search for ways to shorten the test process. In fact, all states that currently use the IM240 allow some type of fast-pass, usually as early in the test as second 31, and Arizona allows vehicles to fast-fail after second 93. While these shorter tests save states millions of dollars in inspection lanes and driver costs, there is a loss in information since test results are no longer comparable across vehicles. This paper presents a methodology for estimating full 240 second results from partial-test results for three pollutants: HC, CO and NOx. Using random sample of vehicles in Arizona which received full 240 second tests, we use regression analysis to estimate the relationship between emissions at second 240 and emissions at earlier seconds in the test. We examine the influence of other variables such as age, model-year group, and the pollution level itself on this relationship. We then use the estimated coefficients in several applications. First, we attempt to shed light on the frequent assertion that the results of the dynamometer test provide guidance for vehicle repair of failing vehicles. Using a probit analysis, we find that the probability that a failing vehicle will passing the test on the first retest is greater the longer the test has progressed. Second, we test the accuracy of our estimates for forecasting fleet emissions from partial test emissions results in Arizona. We find that forecast fleet average emissions are very close to the actual fleet averages.

Abstract: This paper examines implications for cost-effective allocation of pollution controls when preferences of coalitions organized along regional lines, or according to preferences for air vs. water quality improvements, are accounted for. Results are compared to a base case in which NOx emissions reductions must satisfy only a water quality standard, and total costs are minimized over emissions sources. Relative to base-case result that marginal control costs must be equal across sources, stronger relative preferences for air imply shifting of control toward sources that produce greater ancillary benefits to air quality. Regional differences may require side payments to induce cooperation where benefits are low, but this will not affect how controls themselves should be allocated.

Abstract:

Regulation of mobile source emissions in the US has evolved as a complex combination of central government and decentralized authority. The central government required uniform new car emissions standards in the 1970 Clean Air Act, but gave states the power to meet ambient air quality standards however they saw fit, including various regulations on mobile sources. The 1990 Amendments to the Act strengthened the Federal role in some ways, by requiring tighter new car standards and more specific requirements for fuels and for vehicle emissions inspection and maintenance, but at the same time left states with a great deal of latitude to meet ambient standards and took greater recognition of regional variation in environmental problems. We examine the role of various levels of government in attempts to control vehicle emissions in the US, focusing primarily on regulations affecting ambient ozone pollution.

Current regulations coming out of the 1990 Amendments are still the subject of much controversy. Several regulations are examined here from the federalist perspective, including the California new car standards and the current debate over "enhanced" inspection and maintenance. We discuss the theoretical basis for national uniform regulations, including production scale economies for new cars, pollution spillovers from one jurisdiction to another, and prevention of state non-compliance with ambient air quality goals. For the analysis of economies of scale in production, we model the trade-offs between gains from scale economies in polluted regions and losses from excess controls in cleaner regions, and illustrate the role of interregional transfers or side-payments. These trade-offs and transfers are particularly important as decisions are being made about whether the "California cars" will be sold only in California or whether they will be sold in the Northeast states and elsewhere. We then look at the debate over enhanced I&M. Finally, we draw some tentative conclusions about the future role of the states versus the central government in US ozone policy.

Abstract: The paper compares policy alternatives for reducing vehicle emissions when there is uncertainty in the ability of existing emissions tests to identify a vehicle's true emissions rates and also in the ability to predict the effectiveness of repair. Using a simulation model, we compare the cases of a command and control type of policy, like a vehicle inspection program which requires the repair of all failing vehicles, to emissions fee policies which give motorists choice about whether to repair their vehicles. We find that even under uncertainty, fees are more efficient than the command and control policy. We do find, however, that uncertainty has a large impact on the costs and emissions reduction potential of both policies. In addition, we find that uncertainty can have important impacts on the evaluation of fee alternatives. Under uncertainty, a fee which only has to be paid after emissions reach some limit, are found to be as efficient as pure fees but have the advantage of mitigating the high costs of fees to motorists. Maximum fees with repair subsidies are also we also examined and are found to have both efficiency and distributional advantages, but are likely to face incentive and implementation problems.

Abstract: In this paper we review and analyze the existing estimates of the costs of compliance with environmental regulation of light duty vehicles over the two decades, 1970 to 1990. The cost estimates reviewed include several on-going compliance costs estimates by government agencies: (i) EPA's periodic estimates which can be found in the Cost of Clean Air and Water Reports of 1984, 1990 and in unpublished 1993 revisions, and (ii) estimates by the Bureau of Economic Analysis (BEA) which are published in the Survey of Current Business. We also look at several independent research studies, one by Lawrence White (1982) The Regulation of Air Pollutant Emissions from Motor Vehicles, another by Robert Crandall et al. (1986) Regulating the Automobile, and one study of capital costs for 1990 model year vehicles in California by Wang, Kling and Sperling (1993) "Emission Control Costs for Light-Duty Vehicles." We compare the methods and assumptions used by these studies for estimating the costs of complying with environmental regulations, focusing on the three major components of cost: capital, operating, and maintenance costs. We then explore some of the difficult conceptual issues that arise when trying to define and estimate these costs, such as defining the baseline or "no regulation" world, determining which costs should be included when there is more than one regulatory change, and how to define costs to include the full social costs of the regulations. Where possible, we suggest some ways that the cost estimates might be improved or made more consistent.