Distributional effects of vehicle emission standards between cities

Abstract: Fuel economy (CAFE) and zero-emission vehicle (ZEV) standards drive the adoption of more fuel-efficient and electric vehicles (EV) to reduce emissions of carbon and local pollutants. We examine the welfare implications of these policies on a spatial level and their distributional effects between metropolitan statistical areas (MSA) in the U.S. We develop a monocentric urban model that includes household-level choices of fuel economy and vehicle type (ICE vs. EV) and a stylized vehicle market. We apply the generalized method of moments to structurally estimate the model with geocoded ZIP code-level data on US real estate prices and with county-level and MSA-level controls. Counterfactual simulations show that fuel economy and ZEV standards place a disproportionally high welfare cost on small, low-income, low-amenity cities and favor large, high-income, high-amenity metro areas. Carbon taxes have the opposite effect.

Further information on the Economics Research Seminar can be found here. 

Author: Responsible: Thomas Steger