How a “little” California vehicle standard prevented an urban “airmaggedon”
My midlife crisis did not lead to me to buy a German convertible — which would assist me in tanning my bald head and at the same time increasing the earth’s albedo — but rather to a rigid exercise regimen. I have discovered my love for running. Yesterday morning I left my hotel room in Berlin on a sunny day and headed towards the Reichstag along the river Spree. And I nearly choked. The stench of Diesel was pretty much unbearable. European cities are living through an “airmageddon”, with concentrations of some of the most toxic particulate matter in major urban centers breaking record levels in recent years on bad days.
Part of the problem is the incredibly high penetration of diesel engines in passenger cars. Germany registered 3.35 million new cars last year, of which 45.9% had a diesel engine and 2% had alternative (read hybrid or CNG) engines. The reason for this is that regular gasoline is expensive. The cheapest gas I could find in Berlin is $5.56 per gallon. A gallon of diesel is $4.58 per gallon. This difference is not due to the underlying cost of the fuel but the fact that diesel is taxed at a significantly lower rate. Also, using a VW Golf as an example, the diesel engine uses roughly 20% fewer gallons (excuse me liters) per mile than a power equivalent Otto (read regular) engine. The upfront price of diesel cars is higher, but for said Golf you break even after 18,000 miles and are printing money thereafter. Plus, diesel-powered cars are fun to drive as even a small Golf has the torque of a small tractor.
In theory diesel engines with the right filtering technology and regular checkups and adjustments are “clean”. But there is the problem that not everyone brings their diesel to an annual checkup. Further there is the little problem of criminal and reckless lying of companies like VW on the true emissions of these vehicles. Many European cities have introduced Low Emission Zones, where only the cleanest cars get to drive into the urban core and now some major cities are contemplating banning diesel cars outright from their downtowns. As my former student Hendrik Wolff points out, these policies have been reasonably successful at improving air quality. Really fixing this problem for the Europeans is going to require a U-turn on diesel. A straightforward policy intervention would be abandoning the favorable tax treatment of this fuel. This is politically difficult, as French manufacturers have specialized in the production of small diesels. Any punishment of diesels would be regarded as failure to make Peugeot great again.
But why do we not have this problem in the United States? We know that we Californians are just a bunch of regulation-loving outdoor fanatics having massaged kale for breakfast. But this bunch of hippies has historically had the most stringent tailpipe emissions standards in the world. This was made possible by the so called “California Waiver”, which allows California under certain settings to set stricter standards than the ones required at the federal level. These tailpipe emissions standards were impossible to attain with the small popular diesel engines until very recently. And VW only managed to get there by committing fraud. European manufacturers historically had pushed to radically ramp up the increase of diesels sold in the United States. California regulation stopped this invasion of the diesels in its tracks. California was an appealing market for diesel vehicles because at the time they appeared to be more fuel and somewhat more greenhouse gas efficient. Further, under the Clean Air Act other states could adopt California’s standards without seeking approval from EPA (in fact in 2007, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington had done so, which is of course a large share of the US market for passenger vehicles).
Does this mean diesel emissions are not a big deal in California and elsewhere in the US? Of course they are. Big trucks are largely powered by diesels and there are a massive number of trucks on US roads. CARB and the US EPA have done a lot to make sure that the diesel fuel going into trucks has become cleaner by requiring low-sulfur diesel. But is this regulation efficient? Is it working? The answer is that I have no idea. Economists have largely ignored regulation of big-rig trucks. The externalities from these trucks are likely significant in terms of pollution, congestion and accidents. But I am aware of next to no papers in the economics literature which have attempted to quantify these externalities.
So what would I like economists to do? Get to work on quantifying the externalities from big diesel trucks. And everyone should light a LED candle in support of the California Waiver. It will need all the support it can get for the foreseeable future.