Economics of air pollution in cars -getting there but in the slow lane- Prof. Stef Proost FEB-Economics

Transcription

1 Economics of air pollution in cars -getting there but in the slow lane- Prof. Stef Proost FEB-Economics

2 Issues Should we aim for zero air pollution? What is the appropriate fuel for cars? Is fuel efficiency improvement the objective? Should we aim for carbon-neutral cars? Public transport or slow modes as alternatives?

3 Approach Economic approach to environment Damage of air pollution Costs of emission reduction Selection of policies Car problems revisited Analysis of different policies

4 Economic approach to air pollution Optimal pollution level is where cost of further reduction of emissions becomes higher than the damages avoided Estimation of damages avoided when one reduces emissions Crucial to include all victims ( space, time, effects) Estimation of additional costs of emission reduction Do it in cheapest way: ask more efforts from polluters that can easily reduce pollution (can be factor 10 different) Everybody the same % reduction can be much more costly and it not necessarily fair

5 Optimal Pollution model with polluters A,B and victims 1,2 MD MAC I MAC A IV MAC B V pollution pollution pollution MD1 II Optimal abatement for A Optimal abatement for B MD2 III pollution pollution 5

6 Environmental damage saved (non-co2) Pathway approach What transfer and impact mechanisms Valuation of damages Results SOURCE: EU Handbook on estimation of external costs of transport: studies/doc/2014-handbook-external-coststransport.pdf

7 Impact pathway approach

8 EC- Handbook on external costs (2014)

9 Monetary valuation (VSL, YOL..)

10 Estimation of costs of emission reduction Optimal Combination of Make polluting activity cleaner ( cleaner cars via cleaner engines, cleaner fuels, better driving etc.) Reduce the polluting activity (driving less) Most common mistake: Include existing taxes in the cost Example: cost of reducing gasoline use is NOT 1,3 Euro/liter (what consumers pay) but is equal to 0,5 Euro/liter (before taxes)

11 Properties of policy instruments EMISSION TAXES EMISSION REDUCTION SUBSIDIES TRADEABLE EMISSION PERMITS LEVERS COST-EFFICIENCY OPTIMAL LEVEL OF EXTERNALITY Greener activity TRANSACTION AND ENFORCEMENT COSTS Yes Not guaranteed High: Measure emissions Activity Greener activity Yes - partly Not guaranteed High: Measure emissions and initial emissions Greener activity Activity Yes Not guaranteed High: Measure emissions and initial emissions STANDARDS Greener activity Only if perfect information Can be lower on costs OTHER: NEGOTIATION, LIABILITY 11

12 Emission standards for new cars in the EU (non CO2)- result of AUTO-OIL (EC)

13 Diesel-Gate Increasing difference between test cycle and real world emissions (NOx) (compare small area (test) with big area (real))

14 Car use - problems Car use generates many benefits But also many costs that we impose on society: the external costs : Air pollution Greenhouse gas emissions Congestion: increasing the delay for others Accidents: increasing the risks for others But we use an inefficient patchwork of instruments

15 External costs in transport CONGESTION TRAFFIC SAFETY AIR POLLUTION NOISE CLIMATE CHANGE SOURCE Too many users of the same facilities increase in vehicle travel cost and schedule delay costs More intensive or more mixed use increases the average probability of accidents Exhaust of combustion engines (car, trucks, bus airplane, power stations) Vehicles, trains, airplanes Fossil fuel use by vehicles, airplanes, PUBLIC ABATEMENT Capacity (road, airports, rail platforms etc) Adaptation of road equipment, emergency services etc. Noise walls, more silent road surfaces FEEDBACK ON SOURCE OF EXTERNALITY Negative: more congestion decreases travel demand Negative: larger risk of accidents, decreases travel demand MEC ESTIMATION Mainly time and schedule delay costs Mainly health, loss of live, material damage Mainly health, loss of live Discomfort, health Long term disruption of climate (sea level, cooling costs, water supply...) INSTRUMENTS USED Congestion pricing, gasoline taxes, regulation (trucks delivery times),.. Traffic regulations (max speed etc.) Pricing (experience rating of insurance premium) Standards on car emissions and quality of fuels (sulfur content of gasoline and diesel) Standards on cars, banning use of certain equipment at night Tradable permits for night flights Standards on fuel consumption (minimum efficiency) CO2 taxes Tradeable permits 15

16 External costs of car use

17 Current car policy relies mainly on high fuel taxes and high subsidies for PT High gasoline taxes are used to discourage car use and to reduce geenhouse gas emissions Emission standards for cars are used to address conventional air pollution Result has been: Very costly and probably ineffective reduction of CO2 emissions Favouring diesel cars (slightly less CO2 emissions but more other emissions) and now electric cars

18 Simplest model for Economics of international agreements International Agreement needs to be Self Enforcing because there is no agency enforcing international agreements Each country signing is as well off as a non signing country A signing country maximizes the total welfare of the members of the group joining the agreement RESULT 1: only very few countries will sign an agreement and do more than caring about their own climate damage Paris 2015: many promises, not much real action RESULT 2: on international oil markets, the oil not used by good willing countries (EU) will be used by others, so net result on CO2 emissions of using less oil is close to 0, mainly postponing emissions

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20 Taxation of motorfuels and fuel efficiency of cars Main benefit of high gasoline tax is to discourage car use in the peak period A more fuel efficient car will drive more miles, this is not what we want, so fuel efficiency is not the priority How to tax other fuels: diesel, electricity Major difference between fuels is their damage per km = climate damage But this climate damage is only small part of total external costs per kilometer

21 Implications for other motorfuels: diesel Diesel has been promoted too strongly (lower fuel tax per liter) because a diesel car has a small advantage in terms of emissions of CO2/ veh km (approx 10%) But diesel cars emit more conventional air pollution (vehicles emit much more than in the test cycle)- diesel-gate of VW and other manufacturers Diesel cars need less liter/ vehkm so consumer cost of driving is smaller Diesel should be taxed 20% or more per liter than gasoline Current government is finally starting to do this doing

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23 Diesel-Gate : increasing difference between test cycle and real emissions (NOx) (compare small area (test) with big area (real))

24 Electric cars Main advantage: less CO2 emissions In EU CO2 emission from electricity production is capped This justifies a small tax advantage per veh km But many countries (pushed by EU regulation) offer large purchase subsidies, no excise taxes, free electricity etc. This means in the end a cost per ton of CO2 saved of 1000 to 2000 Euro/ ton (to be compared with 10 to 25 Euro/ ton in industry). Cheaper driving for electric cars So very expensive solution to reduce carbon emissions

25 Leuven: subsidised e-parking, insufficient parking for bikes

26 What car fuel policies make sense? Develop cheap, transferable technologies.. Discourage diesel cars by making them pay taxes/veh km as large (or larger) than gasoline cars Make Electric cars pay the same excise taxes per vehicle km as gasoline cars Continue research on cleaner (conventional pollution) vehicles Substitute large part of fuel taxes by electronic road pricing

27 Air quality in cities High density of population means high local pollution costs High congestion levels Need for spatially differentiated policies Low emission zones Policies that restrict access do better than policies that promote public transport (German assessment) New diesel cars can t do the job Public transport often more and more alternative for cycling Need for restrictive car use policies to address congestion

28 Sources EU Handbook on estimation of external costs of transport: studies/doc/2014-handbook-external-coststransport.pdf De Borger& Proost (2015), Tax and regulatory policies for European Transport getting there, but in the slow lane, CES-Disc Paper. s-papers/dps15/dps1511.pdf