International Trade in Used Vehicles Can trade between wealthy and poorer countries damage the environment locally or globally? The pollution haven hypothesis concentrates on international trade’s effect on the location of production Finds little evidence that “dirty” industries migrate to poorer countries

Could changes in consumption (as opposed to production) induced by trade affect the environment? North American Free Trade Agreement (NAFTA) went into effect in1994 Immediately lowered or eliminated US tariffs for many goods from Mexico (and Canada) Set timetable for elimination of tariffs for other goods Pre NAFTA, Mexico did not allow importation of used passenger vehicles from US

NAFTA mandated Mexico to allow gradual increase in used cars manufactured in US From 2005 to 2008, Mexico allowed importation of used US and Canadian cars that were 10-15 years old The allowance was ahead of schedule of what NAFTA called for Political pressure in Mexico effectively ended the importation policy in 2008

Differences in income and cost of maintaining vehicles generates market between relatively poor and wealthy countries Poorer countries may purchase used cars from richer Due to technology differences and wear, used cars generally more polluting than newer Paper looks at whether the trade in used cars increased greenhouse gas emissions, and affected local air quality

2.45 232 24.8 11.4 8.8 13.7 Vehicles that entered Mexico 2005 - 2008 Stock of Vehicles in US in 2005 Stock of Vehicles in Mexico in 2008 Total Number of vehicles (millions) 2.45 232 24.8 Mean Vehicle Age (years) 11.4 8.8 13.7

Top ten traded vehicles Ford Explorer (SUV) Chevrolet S-10 (truck) Dodge Caravan (minivan) Ford Ranger (truck) Ford Windstar (minivan) Chevrolet Silverado (truck) Ford F-150 (truck) Plymouth Voyager (minivan) Jeep Cherokee (SUV) Ford Taurus (car)

Were US cars traded in Mexico more polluting than the average vehicle in the US? Knowledge on the VIN of traded cars allowed researchers to know the make and model year of each car Used data from California emissions testing to calculate weighted average emissions for all cars in US, and used cars exported to Mexico

Stock of Vehicles in US in 2005 Vehicles that Entered Mexico 2005-2008 Stock of Vehicles in Mexico in 2008 Local Pollutants Hydrocarbons (ppm) 39.9 44.4 50.7 Carbon Monoxide (percent) 0.147 0.153 0.215 Nitrogen Oxide (ppm) 248 309 321 Global Pollutants Miles per Gallon 23.8 23.5 22.3 Vehicle Weight (pounds) 3,516 3,708 3,460 Engine Size (liters) 3.47 3.70 3.45

Change in total number of cars across countries induced by policy The effect of the trade policy on total emissions across the two countries reflects Change in total number of cars across countries induced by policy Total number of vehicles operating in US estimated to have decreased only slightly Total number of vehicles in Mexican may have grown Effect on composition of cars in two countries Cars entering Mexico on average emitted more local pollutants than cars in the US but less than cars in Mexico Cars entering Mexico were heavier and had larger engines than cars in the US or those in Mexico.

Change in total number of cars used in the two countries induced by policy Mexico imported 2.5 million used vehicles between 2005 and 2008 Was the number of registered vehicles in the US at the end of the period 2.5 million less than it would have been if not for the trade? Vehicles exit from use yearly due to age, accidents etc.

The 2.5 million exported vehicles represented roughly 1% of the total stock of registered cars in US Paper finds vehicle exit rate largely unaffected by used car trade Concludes many of the vehicles traded to Mexico would have been or already had been retired

Effect of policy on total cars in Mexico Did the flood of used cars in the country substitute for new car purchases? Sp - supply of cars in Mexico before policy Sa – supply while policy in place D – demand for autos Total change in number of cars in Mexico depends partially on shape of demand curve

In the period immediately prior to 2005, roughly one million new cars were sold in Mexico yearly Equal to number of used cars entering the country from US over 2005-2008 One to one replacement of new cars for used would have eliminated all new car sales Little evidence is found that new car sales changed once US used cars became available

What is the net change in pollution caused annually by the trade in used cars and the total pollution over the lifetime of the cars traded? Pollution went up in Mexico due to the increase in 2.5 million cars in the country The composition of the cars also contributed to total annual emissions change Pollution was slightly less in the US due to small measured decrease in total number of vehicles

Emission Annual Estimate (2008) Total emissions caused by the used car trade calculated as: Net change in number of cars in country by make/model × average miles driven by make/model × emissions per mile Emission Annual Estimate (2008) Carbon Dioxide (millions of tons) 5.6 Hydrocarbons (thousands of tons) 3.4 Carbon Monoxide (thousands of tons) 41.3 Nitrogen Oxide (thousands of tons) 7.9

Contribution to Greenhouse emission over lifetime of vehicles Trade in used vehicles from US to Mexico represent a net increase in greenhouse gas emissions for two primary reasons Evidence suggests many of the vehicles traded (roughly 9 out of 10) would have otherwise been retired in US (sent to scrapyard). Vehicles are used in Mexico longer The estimated yearly retirement rate for US vehicles that are 10 to 30 years of age is 12.2% The corresponding retirement rate in Mexico is 3.8%

Estimates of the net change in emissions over 30 year profile of traded autos Lifetime Estimate Carbon Dioxide (millions of tons) 83.9 Hydrocarbons (thousands of tons) 50.9 Carbon Monoxide (thousands of tons) 618.7 Nitrogen Oxide (thousands of tons) 118.9

The net lifetime increase in greenhouse emissions due to trade represents roughly 1% of the Mexico’s total annual CO2 emissions The social damage from change in local pollutants is hard to evaluate Depends on local environment Additional nitrogen dioxide emission is more damaging in Mexico City than in rural area