Incentives-(g)


 * Holzman, David C. “Driving up the Cost of Clean Air.” __Environmental Health Perspectives__ 113 no. 4 (April 2005): A246-A249.**

Holzman describes costs associated with the burning of fossil fuels not captured in most cost analyses (such as externalities, e.g., defense costs to ensure a continuous supply of oil from the Persian Gulf, costs of climate change, or air pollution), or are not readily apparent (such as federal regulations, e.g., fuel economy of (CAFE) standards, EPA Tier 1 and 2 regulations (it is forecasted that Tier 2 regulations, when fully implemented, will add $100-$200 to the cost of new car), or the removal of sulfur from gasoline (projected to add approximately $.02 per gallon at the pump)). Other measures designed to improve air quality, but could add cost include: 1) a new proposed federal system … which would have financial implications for car manufacturers (whose vehicle emit greenhouse gas emissions), whereby “car manufacturers would receive fuel economy credits for exceeding the target fleet average, and instead of meeting the target, they could buy credits from other manufacturers or the government. The prospect of selling extra credits might motivate manufacturers to boost fuel economy beyond the target [(cap-and-trade system)]” (p. A249); 2) a gasoline tax, which could function like a carbon tax and could “[address] the fuel-related externality of carbon dioxide emissions and the resulting climate change (p. A249); 3) “So-called feebates … would provide a rebate to buyers of cars and trucks that exceed a fuel economy benchmark, and charge a fee to buyers of cars that miss the benchmark” (p. A249); 4) scrap-and-replace program “for low-income households, which would get what are traditionally the least efficient cars off the road, and provide poorer families with reliable, affordable personal transportation” (p. A249). This article provides an overview of current and potential policy options to provide incentives for car manufacturers to produce and consumers to purchase vehicles that emit few greenhouse gas emissions. **(Hilary Straus)**

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