Regulatory emission limits for mobile sources and the Porter hypothesis: a survey of the literature

Franckx, Laurent (2014): Regulatory emission limits for mobile sources and the Porter hypothesis: a survey of the literature.

Abstract

This paper reviews the available evidence on the relevance of the Porter hypothesis for automotive emission standards. It focuses on two channels through which the Porter effect may operate. First, there is evidence that emission standards for cars have had important effects on innovation at different levels in the supply chain (the “weak” form of the Porter hypothesis), without discernible long-run negative effects in industry performance. However, there is no strong evidence either that regulations lead to an overall increase in productivity (the “strong” version of the Porter hypothesis). Second, there is relatively strong evidence that countries are more likely to have more stringent domestic vehicular emission standards if they export more automobiles and automobile components to countries which themselves have more stringent vehicular standards. There is also (mixed) evidence that countries which receive more inward foreign direct investment in the automotive sector are more likely to have more stringent domestic emission standards. This suggests that imposing strict emission standards may bring some “first mover advantages” to the leading countries, in line with the Porter hypothesis.

• Item Type: MPRA Paper
• Language: English
• Keywords: Porter hypothesis, automotive emission standards, disruptive innovation, first-mover advantages, pollution control technology
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R48 - Government Pricing and Policy

References

Ambec S., Cohen M.A, Elgiez S., and Lanoie P. (2013), The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? Review of Environmental Economics and Policy, volume 0, issue 0, 2013, pp. 1–22, doi:10.1093/reep/res016

Bresnahan T.F. and Yao D.A (1985)., The nonpecuniary costs of automobile emissions standards, Rand Journal of Economics, Vol. 16, No. 4, Winter 1985

Burke A., Abeles E., and Chen B. (2004). The Response of the Auto Industry and Consumers to Changes in the Exhaust Emission and Fuel Economy Standards (1975–2003): A Historical Review of Changes in Technology, Prices, and Sales of Various Classes of Vehicles. Prepared for CARB under contract 02-310. http://www.its.ucdavis.edu/pubs/pub2004.htm

Chen B., Abeles E., Burke A., and Sperling D. (2004). Effect of Emissions Regulation on Vehicle Attributes, Cost, and Price. Prepared for CARB under contract 02-310. http://www.its.ucdavis.edu/pubs/pub2004.htm

Dechezleprêtre A., Perkins R. and Neumayer E., 2012. "Regulatory distance and the transfer of new environmentally sound technologies: evidence from the automobile sector," Grantham Research Institute on Climate Change and the Environment Working Papers 73, Grantham Research Institute on Climate Change and the Environment.

Delphi 2014, Worldwide Emissions Standards http://delphi.com/pdf/emissions/Delphi-Passenger-Car-Light-Duty-Truck-Emissions-Brochure-2013-2014.pdf

European Commission, IMPACT ASSESSMENT GUIDELINES, SEC(2009) 92

European Environment Agency (EEA) (2012), The contribution of transport to air quality, TERM 2012: transport indicators tracking progress towards environmental targets in Europe, EEA Report, N° 10/2012.

ExternE, External Costs of Energy, available at http://www.externe.info/externe_d7/

Gerard D. And Lave L.B. (2005), Implementing Technology-Forcing Policies: The 1970 Clean Air Act Amendments and the Introduction of Advanced Automotive Emission Controls, Technological Forecasting and Social Change, Volume 72, Issue 7, September 2005, Pages 761–778

Hascic I., de Vries F., Johnstone N. and Medhi N. (2009), Effects of Environmental Policy on the Type of Innovation: The Case of Automotive Emission-control Technologies ,ISSN 1995-2848, OECD Journal: Economic Studies

Kuik O. (2006), Environmental Innovation Dynamics in the Automotive industry. A case study in the framework of the project ‘Assessing innovation dynamics induced by environment policy’. E-07-01.

Lanjouw and Mody (1996), Innovation and the international diffusion of environmentally responsive technology, Research Policy 25, 549-571.

Lee J., Veloso F. M., Hounshell, D.A. (2011), Linking induced technological change, and environmental regulation: Evidence from patenting in the US auto industry, Research policy (40), 1240-1252

Lee, J. and Veloso, F., "Inter-Firm Innovation under Uncertainty: Empirical Evidence for Strategic Knowledge-Partitioning" (2006). Department of Engineering and Public Policy. Paper 128. http://repository.cmu.edu/epp/128

Managi, S., Hibiki, A. and Arimura T.H. (2010), Environmental regulation, R&D and Technological change, mimeo.

Medhi (2006), Patent Tales: trailing emission control technologies in the developing world. Mimeo, Syracuse University.

NEEDS, New Energy Externalities Developments for Sustainability, http://www.needs-project.org/index.php?option=com_frontpage&Itemid=1

Office of Information and Regulatory Affairs, Circular A-4, "Regulatory Impact Analysis: A Primer” (August 15, 2011), http://www.whitehouse.gov/sites/default/files/omb/inforeg/regpol/circular-a-4_regulatory-impact-analysis-a-primer.pdf accessed on 15 April 2014

Perkins, R. and E. Neumayer. 2012. Does the “California effect” operate across borders? Trading- and investing-up in automobile emission standards. Journal of European Public Policy 19: 217-237.

Porter, M. (1991). America’s green strategy. Scientific American 264 (4):168.

Renda, A. (2011), Law and Economics in the RIA World. Improving the use of economic analysis in public policy and legislation. Intersentia Ltd. Cambridge-Antwerp-Portland

Saikawa, E. and Urpelainen, J. (2014), Environmental standards as a strategy of international technology transfer, Environmental Science & Policy 38, pp 192-206.

Sperling D., Abeles E., Bunch D. , Burke A., Chen A., Kurani K. And Turrentine T. (2004). Analysis of Auto Industry and Consumer Response to Regulations and Technological Change. Prepared for CARB under contract 02-310. http://www.its.ucdavis.edu/pubs/pub2004.htm