![Sample our Geography journals, sign in here to start your FREE access for 14 days]({"type":"image" , "src" : "/sda/5937/TOC-Subject-Sample-2021-Geography.jpg"})
Abstract
This paper reviews the available evidence on the relevance of the Porter hypothesis for automotive emission standards. The literature confirms that emission standards for cars have had important effects on innovation (the ‘weak’ form of the Porter hypothesis). However, there is no evidence that regulations lead to an overall increase in productivity (the ‘strong’ version of the Porter hypothesis). In line with the Porter hypothesis, strict emission standards may bring some ‘first mover advantages’ to leading countries. For instance, 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.
Acknowledgements
The author would like to thank an Associate Editor of this journal, Dr Moshe Givoni, three anonymous referees and Dr Inge Mayeres for their constructive comments on previous versions of this paper.
Disclosure Statement
No potential conflict of interest was reported by the author. AECC has not steered the actual contents of the report beyond the provision of factual information. VITO's work in this contract does not imply an implicit endorsement of AECC's policy positions and vice versa. Conversely, the contents of this report do not in any way represent an official position of AECC or its members. All errors are solely the author's responsibility.
Notes
1. The adaption of more fuel-efficient vehicles is hampered by still another market failure: user myopia — see for instance Bergek and Berghren (Citation2014).
2. We shall see below that some measures to reduce the polluting emissions of cars have also led to benefits for the users. However, these benefits are much less salient than improvements in fuel efficiency.
3. Most of these papers have been identified through searches of the IDEAS (ideas.repec.org) and ResearchGate (www.researchgate.net) databases, using different combinations of the search terms ‘Porter hypothesis’, ‘technology diffusion’, ‘emission standards’, ‘cars’ and ‘mobile sources’, supplemented with similar searches on Google.
4. There are some older papers on the impact of the CAAA, but none of them really falls within the scope of this review. Dewees (Citation1974) was published too early after the CAAA to account for technological change. Crandall, Keeler, and Lave (Citation1982) estimate the changes of the full cost of car ownership that are due to safety and emission regulations, but after correction for technological change. Finally, as explained by Bresnahan and Yao, Langenfeld (Citation1983) uses a single variable as a proxy for all emission standards, and does not explicitly consider how compliance with the standards is achieved. As a result “his specification imposes the restriction that quality costs are monotone over time as the standards grow more stringent” (emphasis added).
5. Burke et al. also consider the impact of fuel economy standards.
6. Mainly the introduction of the two-way oxidation catalytic converter — see Burke et al. (Citation2004, p. 16).
7. Corresponding to the introduction of the three-way oxidation/reduction catalytic converter (which was needed to meet the 1981 emissions standard) and complementary new engine technologies (including “fuel injection, electronic ignition, an O2 sensor and computer control of new technologies” — see Burke et al. (Citation2004, p. 17)).
8. He also considers a variant where only the most stringent fuel efficiency standard is taken into account.
9. However, this impact no longer persisted in the early 1990s. By 1977, the share of foreign sources (mainly German and Japanese) in the number of patents granted in the US for vehicular air pollutants had already risen to 66% (Lanjouw & Mody, Citation1996).
10. Managi et al. use the term ‘Porter Hypothesis’ to refer to the hypothesis that we describe as the ‘strong’ version. In order to remain consistent with the convention in the remainder of our paper, we have not followed their terminology choice in this review.
11. South Korea, India, China and Thailand — whether South Korea qualifies as a developing country for the period under consideration is debatable.
12. The methodology for constructing this database is explained in more detail in Perkins and Neumayer (Citation2012). There are several methodological challenges involved in this: (a) differences in test cycles across countries (b) different levels of stringency for different pollutants (c) differences in units used for measuring emission limits.
13. For instance, because intellectual property rights are not perfectly protected.
14. To be more precise, any set of standards that is at least as stringent as the Euro 1 standard.
15. This is not inconsistent with the findings of Perkins and Neumayer: Saikawa and Urpelainen only look at the probability of adopting standards for the first time, and do not consider increases in stringency through time.
16. The analysis is based on Spanish data, but Miravete et al. argue that Spain was fairly representative for Europe as a whole. They also estimate that the relatively favourable tax treatment of diesel in Europe only accounts for about 7% points of the increase of the market share of diesel cars (from about 17% in 1992 to 54% in 2000).