Negative impact of tighter vehicle emissions standards

As regulations around emissions increase, so does non-compliance in the auto industry, says a report.

Published in Production and Operations Management, the research “The Effects of Tightening Standards on Emissions” used on-road data collected from the EU between 2000-2014, a period in which regulators tightened restrictions on Nitrogen Dioxide (NOx) three separate times.

Researchers said that the non-compliance was as a result of conflicting interests and external forces which impacted strategic approaches. Those automakers facing greater substitution pressures from competitors and with less advanced emissions control technology were more likely not to comply with regulations.

The cost of installing expensive catalytic converters or reducing the weight or horsepower of vehicles doesn't make for good economics for manufacturers. Car buyers are most concerned about price and safety with emissions performance lower down the pecking order. So the choice for automakers is increase the price (or lose profitability), reduce the perceived safety or exit the market. The VW emissions scandal of 2015 was an illustration of a different strategy, one that revealed that compelling compliance has not had effective regulatory oversight. 

The authors of the report recommend that policymakers should have stricter monitoring of standards and regulate on technology instead of performance or offer credit-borrowing for automakers.

“When setting limit-based performance goals in situations with conflicting interests and imperfect monitoring,” the paper states, “they should anticipate non-compliance from the regulated parties.”