Scrapping Old Vehicles Would Improve Southern California Air Quality at Reasonable Cost

by Lloyd Dixon, Steven Garber

Research Brief

A California program to scrap old passenger cars and light-duty trucks (light-duty vehicles, or LDVs) would improve air quality in the greater Los Angeles area at a reasonable cost. Although presently unfunded and with its future in doubt, the program—if implemented—would help the state meet federal clean-air requirements for ozone in 2010 in the South Coast Air Basin, which includes all of Orange County and the urbanized portions of Los Angeles, Riverside, and San Bernardino Counties. Moreover, because the program appears more cost effective than alternatives for lowering LDV emissions, it—or an improved version—should be implemented.

This "voluntary accelerated vehicle retirement" program was adopted as part of California's 1994 State Implementation Plan (SIP) for Ozone. Because a typical older LDV emits more pollutants per year than a newer one, the program would target vehicles that are 15 years old or older and scrap 75,000 of them every year from 2001 through 2010. Under the program, private enterprises such as state-licensed auto dismantlers would purchase eligible vehicles from their owners at mutually acceptable prices. To qualify for the program, vehicles would have to meet various physical-condition requirements and be in compliance with the state's smog-check program. Dismantlers would permanently destroy the vehicles by crushing or shredding them. Enterprises would sell emissions credits for the scrapped vehicles to the state. The program's yearly cost is estimated at roughly $100 million. Funding has not been secured, perhaps because it must come from state appropriations. In contrast, other regulations to reduce LDV emissions (for example, new-vehicle emission standards and reformulated gasoline) are often financed in less visible ways such as through higher prices for gasoline or new vehicles.

These findings come from a new study by the RAND Institute for Civil Justice, conducted with funding from the Public Policy Institute of California. The study is the first to analyze effects of programs of this type using models of vehicle markets that predict how LDV prices and emissions would be affected while directly accounting for migration of older vehicles into the region where older vehicles are scrapped. It provides a more complete and reliable assessment than has been previously available.

Emissions Cuts Substantial but Probably Short of the Goal

California's goal for this program is to reduce total emissions of the gases that combine to form ozone by 25 tons per day in the South Coast Air Basin in 2010, the final year of the program. A multiyear simulation model predicts that emission reductions in the South Coast will be largest in 2005 and then decline gradually during the remaining five years of the program. (See figure.) In 2010, the program would almost certainly reduce emissions by between 8 and 28 tons per day. The actual emissions reductions would probably be closer to the upper end of this range because several assumptions used throughout the analysis tend to underpredict reductions. After the program is discontinued in 2010, effects on emissions decline rapidly and are essentially eliminated by 2014.

Predicted Effects of Program on Emissions in the South Coast

Vehicle Price Increases Smaller Than Others Have Claimed

A potential disadvantage of the program is the possibility that it would significantly increase the prices of used LDVs. However, the analysis predicts that price increases would be much lower than others have claimed. The report concludes that increases in used-vehicle prices would be between $22 and $271; the best point estimate for vehicle price increases is $66 per LDV. Even the top end of this range is reassuring in comparison with previous claims that prices could rise by $1,000 or more per vehicle. Key reasons that price increases will not be nearly that large are that prices would increase for all used LDVs—not just those old enough to qualify for the program—and that the number of vehicles scrapped by the program is a small percentage of California's used-LDV stock.

Price increases have been presumed to cause two undesirable side effects: (1) a deluge of very old vehicles migrating into Southern California, which could largely dissipate the potential emissions benefits, and (2) economic hardship for low-income households resulting from vehicle-price increases. The analysis suggests that neither side effect would be nearly as troublesome as many seem to fear.

Although the prospect of higher prices would create an incentive to bring vehicles into the South Coast Air Basin, such migration would not nearly eliminate the program's potential emission benefits. In-migration induced by the program would include vehicles of all ages because price increases would be similar for all used vehicles and because the costs of bringing vehicles into the region do not vary greatly with vehicle age. The analysis predicts that 78 percent of vehicles migrating into the South Coast will be less than 15 years old and thus newer, and therefore cleaner, on average, than those scrapped through the program.

The incidence of hardship due to the program's price effects is much more subtle than previous discussions suggest. Many low-income households will not be harmed by increases in used-LDV prices because the extra amount that they will have to pay to buy a used LDV will be offset by the extra amount they will receive by selling one. Undoubtedly, however, some low-income households will be hurt. These are households that will buy used vehicles without selling others because, for example, they will drive their LDVs into the ground before buying used LDVs to replace them.

Scrapping Old Vehicles Is More Cost Effective Than Alternatives

Estimated Cost Effectiveness of Selected Elements of California's Ozone Reduction Strategy (1995 dollars per ton of emissions)

Program Cost Per Ton of Emissions Prevented
Scrapping Program $3,700–33,000
On-Board Diagnostics II $2,000–15,000
Low-Emission Vehicles $1,000–38,000
Transitional Low-Emission $3,000–40,000
California Phase 2 Gasoline $9,000–46,000
Ultra Low-Emission Vehicles $22,000–48,000

Over its entire history, the scrapping program is predicted to cost between $3,700 and $33,000 per ton of emissions. The best point estimate for costs is $13,400 per ton. The table shows that this range compares favorably with corresponding estimates for many of California's existing clean-air programs. More important, the cost effectiveness of the scrapping program is likely to be quite good relative to other yet-to-be-implemented options for further reducing emissions. In addition, the program's costs are probably less than the social value of its health and other benefits. Consequently, the program offers cleaner air at a good price.

Relaxing Some Program Eligibility Requirements Could Be Beneficial

The study concludes that a vehicle-scrapping program should be implemented in the South Coast. The authors also point to ways the program might be improved. The existing program design includes extensive requirements to ensure that the program would not attract vehicles with little remaining life or that had failed the state's smog-check tests. But these requirements may cause vehicle owners to repair vehicles merely to qualify for the scrapping program; such repairs would be wasteful. Possibly much more important, the smog-check requirement would prevent the scrapping of high-emission vehicles that remain on the road despite being out of smog-check compliance, which could substantially undermine the program's emissions benefits.

This report is part of the RAND Corporation research brief series. RAND research briefs present policy-oriented summaries of individual published, peer-reviewed documents or of a body of published work.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.