An analysis of per mile pollution fees for motor vehicles in California's south coast

Abstract

This paper examines the effect of pollution fees based on per mile emissions of reactive organic gases and oxides of nitrogen on tons of pollutants emitted, driving, fuel use and efficiency, new vehicle sales, and welfare in the South Coast region of California. The results suggest that VMT and gasoline demand would be reduced (although at a declining rate) while mpg would improve as households shifted to newer vehicles. Sales of new vehicles are projected to initially rise, then drop below base forecast levels as turnover of vehicles is reduced. Finally, the projected effects on household consumer surplus suggest that pollution fees may be regressive (although less so as households adjust their vehicle holdings), as a significant portion of older, higher polluting vehicles are owned by lower income households. The paper also compares pollution fees with voluntary accelerated vehicle retirement programs.