Sacred Cars? Cost-Effective Regulation of Stationary and Nonstationary Pollution Sources

Abstract

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 most recalcitrant criteria air pollutant in the United States. We find significant differences in marginal abatement costs across source types: the marginal cost of reducing NOx from cars is less than half the marginal cost of reducing NOx from power plants. Our results measure the possible efficiency gains and distributional implications associated with increasing the sectoral scope of environmental regulations.