Policy Diffusion of Auto Emission Standards - Is there a Race to the Top? -

1. Policy Diffusion of Auto Emission Standards- Is there a Race to the Top? - October 27, 2009 Eri Saikawa Science, Technology & Environmental Policy Program Woodrow Wilson School of Public & International Affairs Princeton University

2. Question Methodology Analysis 1 Analysis 2 Conclusion 1st Adoption of Comprehensive Emission Standards Mexico Europe Japan Bangladesh US China India

3. Question Methodology Analysis 1 Analysis 2 Conclusion Dissertation Question Policy Diffusion of Auto Emission Standards Why does diffusion occur? What is the impact? • Mechanisms of Policy Diffusion • Analyze mechanisms of diffusion and impact of adoption on automobile exports • Impact on Air Quality, Health & Climate • Impact of China’s pollution

4. Question Methodology Analysis 1 Analysis 2 Conclusion Impact of China’s Aerosols on Global Surface Concentrations in 2000 SO42- BC [µg m-3] OC Saikawa, et al. “Present and potential future contributions of sulfate, black and organic carbon aerosols from China to global air quality, premature mortality and radiative forcing” Atmospheric Environment43 (2009) 2814-2822.

5. Question Methodology Analysis 1 Analysis 2 Conclusion Impact of China’s Aerosols on Global Premature Mortality in 2000 Saikawa, et al. “Present and potential future contributions of sulfate, black and organic carbon aerosols from China to global air quality, premature mortality and radiative forcing” Atmospheric Environment43 (2009) 2814-2822.

6. Dissertation Question Policy Diffusion of Auto Emission Standards Why does diffusion occur? What is the impact? Mechanisms of Policy Diffusion Analyze mechanisms of diffusion and impact of adoption on automobile exports Impact on Air Quality, Health & Climate Impact of China’s pollution Scenario analyses of China’s adoption China’s Policymaking Process Impact of domestic politics on standards adoption Question Methodology Analysis 1 Analysis 2 Conclusion

7. Question Methodology Analysis 1 Analysis 2 Conclusion Questions & Arguments • Why did emission standards diffuse? • What happens after adoption? Countries adopted standards to enhance the competitiveness of their auto industries. Except for low-income countries, automobile exports increase.

8. Question Methodology Analysis 1 Analysis 2 Conclusion Mechanisms of Diffusion • 4 major mechanisms in the Policy Diffusion literature: • Competitiveness • International Pressure • Normative Emulation • Learning • The “California Effect” (Vogel, 1997)

9. Question Methodology Analysis 1 Analysis 2 Conclusion Competitiveness Mechanism • The California Effect • Exporting countries adopt emission standards when major importing countries adopt standards • Competitor Effect • Exporting countries adopt emission standards when competing exporting countries adopt standards

10. Question Methodology Analysis 1 Analysis 2 Conclusion My Contribution • Extend competitiveness mechanism to environmental standards • Expand the “California Effect” theory to include developing countries • Empirical testing

11. Question Methodology Analysis 1 Analysis 2 Conclusion Methodology • Analysis 1. Event History Analysis • Identify mechanisms of policy diffusion • Analysis 2. Gravity Model of Trade • Assess impact of policy diffusion on competitive advantage in trade

12. Question Methodology Analysis 1 Analysis 2 Conclusion Dependent Variable • Created a database of the years that countries first adopted auto emission standards • Dichotomous coding • Code 0 – without adoption • Code 1 – with adoption

13. Question Methodology Analysis 1 Analysis 2 Conclusion Independent Variables • Competitiveness: • The California effect – Share of auto exports to countries with standards • Competitor effect – Trade similarity • Competitor effect – Auto exports as share of GDP

14. Question Methodology Analysis 1 Analysis 2 Conclusion Independent Variables • International Pressure: • ODA & Official Aid as share of GDP • Normative Emulation: • Number of countries that have adopted standards • Learning: • Number of environmental IGOs of which a country is a member

15. Question Methodology Analysis 1 Analysis 2 Conclusion Control Variables • Real GDP per capita • EU membership • CO2 emissions from transport sector (proxy for tail-pipe emissions)

16. Question Methodology Analysis 1 Analysis 2 Conclusion Standards Adoption • Tested using logit function • Analyzed all countries 1975 – 2000 • Cluster by country • Include year dummies

17. Question Methodology Analysis 1 Analysis 2 Conclusion

18. Question Methodology Analysis 1 Analysis 2 Conclusion Interpretations • Competitiveness appears to be the major factor for standards adoption • High-income countries • “California effect” & “Competitor effect” • Developing countries • Upper-middle: “California effect” • Lower-middle & Low: “Competitor effect”

19. Question Methodology Analysis 1 Analysis 2 Conclusion Qualitative Evidence • 78 interviews in China and Japan • Managers in the automobile industry (Honda, Toyota, Hyundai, GM, VW, Geely) • Government officials (national and local) • Researchers at national institutions, think tanks, and universities

20. Question Methodology Analysis 1 Analysis 2 Conclusion Qualitative Evidence • Main findings • Japanese government pushed automobile industry to develop technologies • Japanese auto industry opposed adoption of standards • Chinese government adopted the standards to reduce air pollution and to increase auto industry competitiveness • Foreign-venture automobile firms in China lobbied Beijing to adopt European standards • Difficult for local automobile industry to meet the requirements

21. Question Methodology Analysis 1 Analysis 2 Conclusion Emission Standards Adoption

22. Question Methodology Analysis 1 Analysis 2 Conclusion Emission Standards Adoption

23. Question Methodology Analysis 1 Analysis 2 Conclusion Emission Standards Adoption

24. Question Methodology Analysis 1 Analysis 2 Conclusion Emission Standards Adoption

25. Question Methodology Analysis 1 Analysis 2 Conclusion Impact of Standards on Exports Gravity Model of trade • Standard framework to assess the effects of bilateral trade • Estimates the impacts of emission standards on automobile exports

26. Question Methodology Analysis 1 Analysis 2 Conclusion Impact of Standards on Exports • 4 variables to consider: • Stdit: exporter’s adoption of standards • Stdjt: importer’s adoption of standards • Botht : both exporter/importer adopting standards • ln(Stdt) : log of number of countries with standards

27. Question Methodology Analysis 1 Analysis 2 Conclusion

28. Question Methodology Analysis 1 Analysis 2 Conclusion

29. Question Methodology Analysis 1 Analysis 2 Conclusion Interpretation • Adoption of emission standards  except for low-income countries, positive effects on auto exports • Adoption of emission standards gives countries a competitive advantage

30. Question Methodology Model 1 Model 2 Conclusion Conclusion • Competitiveness is the major mechanism • Market incentives lead to more stringent environmental standards • Stringent emission standards  better environment, less premature mortality and more auto exports

31. Question Methodology Model 1 Model 2 Conclusion Policy Implications • Other “environmentally friendly” products may also create competitive advantage • Policy diffusion may apply to…. • Product Standards for Appliances • Energy Efficiency Standards • Developed countries can influence developing countries’ behavior