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Economic Instruments for Vehicle Emission Reductions in California


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Suggested Citation:
Sperling, Daniel (1991) Economic Instruments for Vehicle Emission Reductions in California. Institute of Transportation Studies, University of California, Davis, Presentation Series UCD-ITS-RP-91-07

Hearing for 1991 Fuels Report, Testimony to the California Energy Commission

Government may choose from a variety of regulatory and economic instruments to achieve major reductions in vehicle emissions and energy consumption. Historically, countries with market economies have primarily chosen to use direct regulation, mostly prescriptive and uniform performance standards. Recently, the use of economic instruments has been gaining favor as a more efficient means of achieving the same goals. Most attention has been centered on those economic instruments that alter price signals to incorporate energy and environmental externalities — relying on taxes, rebates and subsidies — but California has tentatively embarked on a different path: the use of marketable credits. Marketable credits appear to be a more effective economic instrument for achieving large emission reductions than fuel and vehicle taxes (and rebates), and present a robust framework for guiding transportation energy and environmental choices in the 1990s and beyond.