Are vehicle emission inspection programs living up to expectations?

To ensure that the advanced emission control systems installed on modern motor vehicles continue to work properly, motor vehicle inspection and maintenance (I/M) programs are now found in the major cities of many countries around the world. These programs are widely regarded as valuable and even essential to the achievement of air quality objectives, but there have been few ex post audits of these programs. In this paper, we examine the performance of one of the most sophisticated I/M programs, the USEPA's Enhanced I/M Program. This program has now been implemented in five states. Using data from 1995 and 1996, we estimate the cost of the Arizona Enhanced I/M Program and the emission reductions achieved. We begin by enumerating briefly the components of I/M costs and discuss their size and incidence. Then we describe the empirical information from Arizona and how we use it to construct cost estimates for both vehicle inspection and repair of failing vehicles. Inspection costs include the costs of operating the test stations and the costs motorists incur in time and money to get to the station and go through the testing process. We find that the inspection costs account for over two-thirds of the full costs of I/M, while costs associated with actual vehicle repair account for only one-third. We conclude by comparing the empirical estimates of costs and program effectiveness in the Arizona program with the ex ante estimated Enhanced I/M program costs made by the EPA in the 1992 Regulatory Impact Analysis (RIA). The ex ante EPA analysis appears to have underestimated the costs of achieving the ambitious reductions in emissions hoped for under I/M.