Séminaire

Optimal Corrective Taxes with Untaxable Externalities: Evidence from Vehicle Pollution Standards

James M. Sallee (University of California, Berkeley)

2 juin 2017, 11h00–12h15

Toulouse

Salle MF 323

Environment Economics Seminar

Résumé

We study the effectiveness and efficiency of air pollution standards for new vehicles, which are among the most important environmental regulation for transportation in the U.S. and most other wealthy countries. These standards regulate air pollutants like hydrocarbons, which we show have very different properties than fuel economy and greenhouse gas emissions. Air pollution standards are a specific case of a more general problem where, due to political economy or information constraints, an externality cannot be taxed directly, and other second-best instruments must be used. We show that the pollution emissions rate of the U.S. new vehicle fleet has fallen by more than 99 percent since 1967, and further show that pollution standards have caused a substantial share of these declines. We also show that these standards are inefficient, and only capture a limited share of the welfare gains of a first-best Pigouvian tax. Finally, we assess the relative efficiency of alternative feasible policies. (joint with Mark Jacobsen, Joseph Shapiro and Arthur van Benthem)