The Abatement Cost Function for Motor Vehicle Pollution Emissions: Evidence from Canada

Mandatory inspection and maintenance programs require on-road vehicles to be tested regularly and repaired if they are not in compliance with air emission regulations. The purpose of this paper is to estimate the abatement cost function for a representative inspection and maintenance program. We do this by constructing a model of the statistical process that leads to noncompliance, parameterizing the model, and then by simulating the total abatement cost function. Our model predicts that the marginal abatement cost for a major representative program is so high that even a small reduction in the abatement target leads to substantial social cost savings. In addition, even for quite high levels of the abatement target, the optimal minimum testing age is substantially higher and the frequency of testing is much lower than is common in many jurisdictions.