Course:ECON371/UBCO2009WT1/GROUP3/Article8
== Article 8: Eco-friendly vehicles rally held in Delhi ==
Summary
A first-of-its-kind eco-friendly vehicle rally was held in New Delhi recently. This city made for an excellent location for this type of event. Delhi has the highest number of vehicles in India and has an increasing traffic problem. The chief of Delhi believes that there will always be difficulties with this kind of rally, but hopes that all Indians will except these new types of vehicles. Toyota's Prius was presented as well as the Mahindra Scorpio Bio-diesel. These are just two of the types of vehicles that are the benchmark for what the rally stood for. The ideas presented seemed to be accepted by rally-goers. Such success is vital if these new types of vehicles are going to make a lasting impression.
Alternatives
India, especially the densely populated city of New Delhi, faces huge rates of congestion even in non-peak periods. Cars idling in congestion are a totally unnecessary non-point source emission; there is pollution that results in no benefit (for instance miles travelled.) Its clear that hybrids produce less emissions in the form of exhaust but it is too early to be fully aware of adverse effects of other materials used to manufacture the cars. India already has issues reducing E-waste and the waste from car parts in the future will only hurt pollution rates. The mayor could also have used his image to persuay the public to utilize ulterior modes of transportation, for instance the Delhi Metro, an expanse of 300 km of light rail track. Light rail produces significantly less emissions per passenger kilometer than do cars and knowing the congestion rates in India, it will save them much time as well.
The mayor was trying to morally suade the public into substituting classic fuel using cars into ones that pollute significantly less. This method has is flaws. Not all citizens have the same moral views on the environment. It also leads greatly to free-riding, those citizens who rely on others to pollute less and they reap the benefits. Furthermore, there is a significantly high poverty rate in urban centres of India and hybrids are generally more expensive than non-hybrid automobiles, so will there even be enough people with high enough disposable incomes to purchase a more expensive vehicle? A potential way around this issue is to make regular fuel cars relatively more expensive. This could be performed by decreasing the import tax of hybrids or by creating a fuel tax to tax traditional fuels.
Electric Issues
- According to some recent articles(see link below), India has been experiencing shortages in electricity. This presents a stumbling block for electric car acceptance as most of the common electric cars at present are plugged in to repower. Will Indian's embrace a technology that will further strain the availability of power? It's likely this issue will have to be addressed before people will buy this new product. As the demand for electricity increases, prices will rise even more so because the supply cannot meet the demand and there will be competition for who can pay most. This could also lead to innovation of firms to create new electric power generators. The government of India should try to grasp this situation of news firms entering the industry and make them responsible for their marginal abatement costs or their damaged caused. This would cause the firms to create generators that are less environmentally damaging as to minimize abatement costs paid. To achieve this the government could a) impose a standard, b) create a libability law or c) tax emissions. A standard, to be socailly efficient, should be set where MD=MAC although this is very difficult for the governemnt to know. If the government is aware of the shape of the marginal damage curve it can set the standard at a particular level of damage. Standards are very difficult to monitor and provide little incentive for innovation. Liability laws suade firms to decrease their emissions so that their total costs minus their total abatement costs are minimized. The difficulty and cost of monitoring as well as transaction costs are issues associated with the implementation of liability laws. Taxes will be most efficient to society if they are set where MD=MAC so that the firm may set their MAC eqaul to the tax and produce there. This requires knowledge of MAC and MD curves which again is difficult to attain, however emission taxes do provide an incentive to innovate because innovation causes the firm's MAC to rotate downwards.
http://in.reuters.com/article/domesticNews/idINDEL44867220090710
- Another thing to consider is that a decrease in demand for traditional fuels will result in an increase in the price of those fuels. This might have a negative impact on people in rural communities and the poor who might still have to use these fuels as they might not have access to electricity or might not be able to afford to purchase these new electric vehicles.
Externalities
Hybrid vehicles tend to be much queiter on average compared to regular fuel-utilizing vehicles. The general public will face a decrease in roadway noises as well as decreased pollution levels. Decrease in noise is clearly benefitcial based on defensive expenditures to minimize sound pollution. The decrease in noise also causes potential risks for an increase in accidents (especially those pedestrian related) as the cars will have to be closer to a person in order for them to hear it and escape its path. A social cost benefit analysis could be performed when these externalities are monetized to find the true net social benefit of hybrid vehicles. One must also keep in mind the increased cost (and therefore decrease in disposable income) due to the purchase of a hybrid vehicle over a contempory fuel vehicle. Cost savings due to decrease in gas consumption as well as an increase in electricity used must be compared.
Prof's Comments
Some interesting points. You do have to be careful about market effects though, as you state that reducing the demand for traditional fuels will increase the price. Reducing the demand will reduce the price, all else equal. Price will only increase if the supply falls more than the demand falls.