19 May 2011

Free stickers aren't free

Sharon Shewmake (a postdoctoral scholar at Vanderbilt University's Law and Economics Program) writes:

California issued 85,000 yellow Clean Air Access stickers to owners of hybrid cars. These stickers allowed the owner to drive on HOV lanes without having to carpool. Many other states have similar programs. While incentives for hybrid vehicles might make sense, many policy makers saw these non-financial incentives as a ‘free’ way to encourage adoption of hybrid cars. In our research we found hybrid car owners were willing to pay $625 per year to drive on HOV lanes and when you add up the number of stickers available and the amount of time they were valid, California gave out $270 million to hybrid car owners, despite the program having no documented impact on the number of hybrid registrations. Sixty-percent of this $270 million was wasted outright by giving stickers away to cars that had already been purchased. The rest of it was wasted because a sticker is much less effective than a direct subsidy. If California had sold the right to drive in an HOV lane, and then used the revenue to directly subsidize hybrid cars, the state would have been at least four times as effective than if they’d given the stickers out to all new cars.

Because of the budget crisis, California is making deep cuts to education, public health, and the environment. Meanwhile, the state is continuing the program of giving away access to the next generation of plug-in hybrid electric vehicles and continuing a program for all-electric, natural gas, and hydrogen vehicles. If California were to sell, instead of give away, the 40,000 three-year permits it plans to give to plug-in hybrids, it could raise at least $68 million. A portion of this money could be used to more effectively encourage the purchase of clean plug-in vehicles, while the rest could fund cheaper air pollution mitigation measures, health care, state parks, or public education.

Please read our paper if you’d like to learn more about this issue or see the numbers behind these results.

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