Ambiguous Norms

The extension of Euro II norms on vehicle emissions to cities other than New Delhi may literally seem like a breath of fresh air to the people reeling under the onslaught of noxious fumes. Even more welcome is the proposal to extend the norms to buses and trucks, which have so far been exempt from the standards imposed on new cars. It is quite likely that the accompanying restrictions on older vehicles in the capital will also be extended to other parts of the country as well. In and of themselves, these norms will undoubtedly have a positive impact on the urban environment, and should therefore be welcomed. From an economic

 

perspective, however, two issues make it difficult to arrive at an unambiguous

judgement in favour of this approach to pollution control.

The first relates to the possible tradeoff between cleaner air and easier movement. The sad reality is that public transport systems, all over the country, are in a state of decline. There is something inevitable about this. As incomes increase, the first thing that people want to do is to become independent of the public transport system. The huge increase in investments in private transport during the decade is testimony to this. Whatever their environmental benefits, the norms are going to make private transportation more costly. Vehicles will be more expensive, and so will the better quality fuel, once the administered price mechanism is done away with. The availability of used vehicles will decline, raising their average prices. In short, the income threshold at which people can afford their own vehicles will rise. Other things being equal, the pressure on public transportation will increase, even as the systems themselves show no signs of being able to deal with the higher load.

The second relates to the costs of achieving these norms, and who is to bear them. The old debate on the relative merits of command-and-control instruments (of which the emission norms and the age restrictions are both examples) versus market-based instruments is relevant here. The policy objective is clearly to restrict total emissions. Command and control instruments will achieve this by imposing the costs of doing this on all vehicle owners. Market based instruments will, in theory, induce reductions in emissions by those who find it cheapest to do so. What is needed is a mechanism that allows low cost reducers to be compensated by high cost reducers.

That all or most people want a cleaner environment is a perfectly reasonable proposition. But it would be equally reasonable to suppose that this desire is not unconditional; that it depends on what has to be given up to achieve it. Dependence on decaying public transportation and costlier private transportation may be an unacceptable price to pay for some people at least. To get the full value out of the norms, these concerns should be directly addressed in a broader pollution control framework. This requires, at the very least, a sensitivity to the state of public transportation when setting norms and a willingness to start experimenting with market based instruments.