Essays on Environmental Policies and Vehicle Market

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This dissertation analyzes the impacts of energy efficiency standards, vehicle ownership restrictions, and passenger vehicle emission standards on the vehicle market and evaluates the welfare consequences of these environmental policies. The first chapter focuses on China's vehicle license allocations. Many megacities in China use lotteries and auctions to allocate vehicle licenses and restrict vehicle ownership, making people wait several years for a license. Recently, to promote electric vehicles, some cities introduced a separate system for electric vehicle licenses with shorter expected wait times. This chapter estimates a structural model to quantify the welfare effects of vehicle license allocation and its impact on electric vehicle adoption. I find that vehicle license allocation significantly increases electric vehicle sales. However, it also imposes a high implicit cost of waiting on consumers, engendering a consumer welfare loss of 26-52 billion Yuan in Beijing and Shanghai. Vehicle ownership restrictions also reduced automobile externalities, offsetting more than 80 percent of the consumer welfare loss.

The second chapter evaluates the corporate average fuel consumption (CAFC) standard in China. I set up a structural model of vehicle supply under the CAFC standard and simulated the impacts of China's CAFC standards on the firm's profit, vehicle prices, fuel consumption, and sales. I find that the Phase III CAFC standard reduced the producer’s profit by 1.07 billion Yuan per year. Moreover, the more stringent Phase IV standard reduced the producer’s profit by 4.66 billion Yuan per year. Allowing the trading of CAFC credits will reduce the compliance costs to producers.

The third chapter focuses on the welfare consequences of the passenger vehicle greenhouse gas emission standards in Europe. I show that in a differentiated product market, standards can affect virtually any product attribute, and those effects have ambiguous implications for consumer welfare. This chapter implements a novel strategy to estimate the causal welfare effects of standards on product attributes. Considering European carbon dioxide emissions standards for passenger vehicles, I find that these standards have reduced fuel consumption and emissions. However, the standards have unintentionally reduced vehicle quality, which undermines 26 percent of the welfare gains of the standards.