NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sacred Cars? Optimal Regulation of Stationary and Non-stationary Pollution Sources

Meredith Fowlie, Christopher R. Knittel, Catherine Wolfram

NBER Working Paper No. 14504
Issued in November 2008
NBER Program(s):   EEE   IO

For political and practical reasons, environmental regulations sometimes treat point source polluters, such as power plants, differently from mobile source polluters, such as vehicles. This paper measures the extent of this regulatory asymmetry in the case of nitrogen oxides (NOx), the criteria air pollutant that has proven to be the most recalcitrant in the United States. We find significant differences in marginal abatement costs across source types with the marginal cost of reducing NOx from cars less than half of the marginal cost of reducing NOx from power plants. Our findings have important implications for the efficiency of NOx emissions reductions and, more broadly, the benefits from increasing the sectoral scope of environmental regulation. We estimate that the costs of achieving the desired emissions reductions could have been reduced by nearly $2 billion, or 9 percent of program costs, had marginal abatement costs been equated across source types.

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Document Object Identifier (DOI): 10.3386/w14504

Published: American economic journal : a journal of the American Economic Association.- Nashville, Tenn. : AEA, ISSN 1945-7731, ZDB-ID 24423828. - Vol. 4.2012, 1, p. 98-126

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