Differentiated Regulation: The Case of Auto Emissions Standards

Abstract

This paper presents an analysis of automotive emissions regulation that explicitly considers the link between regulation and the composition of the vehicle stock. The adoption of more stringent emissions standards for new vehicles is shown to prolong the retention of old, high-emission-rate vehicles in the fleet. For this reason, tighter new source standards actually increase aggregate emissions in the short run. This result is of general as well as specific interest given the widespread use of differentiated regulatory tools incorporating a bias against new sources in many regulatory programs. 3 references, 1 table.