Economic analysis of Japanese air pollution regulation: An optimal retirement problem under the vehicle type regulation in the NOxparticulate matter law.

This paper examines the vehicle type regulation that was introduced under the Automobile Nitrogen OxidesParticulate Matter Law to mitigate air pollution in Japanese metropolitan areas. The vehicle type regulation effectively sets the timing for vehicle retirement by initial registration year and type. However, there was no consideration of cost or efficiency in choosing the timing of retirement. We solve an optimal problem to maximize the social net benefit under the current framework of the vehicle type regulation. The analysis finds that the net benefit can more than double if the optimal retirement timing is chosen. Further, we find that even a simple alteration of the retirement timing can increase the social net benefit by 13%.u(A) Reprinted with permission from Elsevier.