April 18, 2007 — Clearing the Air

The costs and benefits of Maryland's new vehicle emission standards are as murky as the exhaust from a large SUV
By Charles Gerena

The Supreme Court has made Al Gore a happy man for a change. Its April 2 ruling gave the U.S. Environmental Protection Agency the authority to regulate the emission of "greenhouse gases" from automobiles. Pending legal challenges from the auto industry, 12 states have implemented rules of their own, including Maryland where lawmakers recently expanded its vehicle emission standards.

But, as every economist knows, there's no such thing as a free lunch. So the question is whether additional regulation of vehicle emissions will improve the planet's health enough to justify the additional economic costs to automakers and consumers. It's not clear what the answer is yet.

The EPA limits the amount of harmful pollutants — including carbon monoxide and nitrogen oxide — spewing from a vehicle's tailpipe or leaking from its fuel system. Because of the severity of its pollution problems, California has been permitted to set its own vehicle emission standards since 1970.

The District of Columbia and the 33 states that don't meet federal air quality standards — including Maryland, Virginia, and the Carolinas — can choose between the EPA's or California's emission standards. Both sets of standards were tightened in 2003, but they differ in which emissions are targeted and how they are regulated. Maryland lawmakers decided to follow California's lead by passing the Clean Cars Act on April 5. Gov. Martin O'Malley signed the bill five days later.

There are two major differences between the federal emission standards that Maryland currently follows and the California rules that the state will adopt starting this June. First, a percentage of new cars sold each year will have to be hybrids and other "advanced technology vehicles" with low or zero emissions. (In California, 10 percent of sales have to fall under this category for model years 2005 through 2008, then the percentage increases every year through 2018.)

Second, carbon dioxide and three other greenhouse gases will be added to the list of pollutants regulated by Maryland's vehicle emission standards, starting with the 2011 model year. (California's greenhouse gas restrictions will kick in for most auto manufacturers in the 2009 model year.)

California has seen a huge decrease in air pollution, especially in Los Angeles which used to be the most polluted city in the nation, says Josh Tulkin, organizing director for the Maryland-based Chesapeake Climate Action Network. However, there is some argument about whether applying California's standards will have the same impact in other states.

Federal emission standards have gotten tougher, imposing tighter controls on emissions resulting from refueling or evaporation, for example. Since California's standards have also tightened, adopting them in states like Maryland may have only a minimal impact.

"The standards are fairly similar," says Virginia McConnell, an economist at the University of Maryland, Baltimore County. McConnell served on a National Academy of Sciences committee that studied regulation of vehicle emissions. California's rules are "a bit more strict," achieving a maximum reduction in emissions of 15 percent compared to federal standards. Still, "I'm not convinced that we know how much of a difference in emissions there will be."

As for global warming, the effect of California's restrictions on greenhouse gases isn't known because they haven't been implemented yet. The Alliance of Automobile Manufacturers says that automobiles and light-duty trucks sold in the United States produce less than 1 percent of the world's greenhouse gases. The implication is that restricting emissions of those gases will yield little benefit by itself.

In addition to the potential benefits of regulating greenhouse gases, there are the potential costs to consider. McConnell says that in order for a portion of car sales to be low- or zero-emission vehicles, dealerships in Maryland will probably raise the prices of larger gas guzzlers to make them less attractive and subsidize lower prices for smaller, more fuel-efficient vehicles. According to estimates released with the text of the Clean Cars Act, the cost of passenger cars and other small vehicles could increase by $1,204 once the greenhouse gas limits are fully phased in. Larger trucks and SUVs could cost $1,356 more.

But it's uncertain whether consumers will ever see these price increases. In the past, automakers haven't always passed on all of the costs of complying with tighter emission standards.

Since the primary way to get a car to produce fewer greenhouse gases is to reduce its consumption of gasoline, fuel-economy improvements are a byproduct of tighter emission standards. But will this result in cars that are smaller and lighter, which could make them less safe?

"There are a whole host of ways to achieve better fuel economy," McConnell says. Materials are now available that are lightweight yet strong. "Vehicles are becoming safer in general, even with the tighter fuel-economy standards that have been imposed over the last 10 to 15 years."

However, McConnell cautions that cars might have been even safer if the standards didn't exist. In general, it is unrealistic to believe that imposing stricter emission standards will yield the benefits we want without costing anything.