Do Japanese emission controls contribute to global warming?

Japan has one of, if not the, strictest emission control regimes in the world. Upon purchase, when a car is three years old, and every two years after that, each car must undergo a rigorous and sometimes costly Sha-ken inspection. These ensure that it meets tough emission standards and is in sound mechanical condition.

Sha-ken makes it expensive for Japanese car owners to keep an older car on the road. Yet these regular inspections, combined with other factors - congested roads that ensure most cars have very low mileage, a relatively temperate climate, underground parking - mean that a five or seven year old Japanese car is typically in excellent condition. The net result is that Japan exports used cars at low prices to Australia, New Zealand, India, South Africa, Botswana, Zambia, and just about every country where right-hand-drive (RHD) cars are used. 

From a narrow, national perspective, Japan's emission control regime appears to protect the environment. Yet by encouraging Japanese  car owners to abandon perfectly good vehicles, which are then dumped on other countries, effectively it subsidizes car exports. From a global perspective, therefore, the environmental impacts of Japan's emissions control regime are far less clear.

An increase in the supply of cars would be expected to increase the quantity of cars on the road. But does increased car ownership automatically increase greenhouse gas emissions? It depends upon the alternatives. Is the alternative to a "new reconditioned" Japanese car a 50 year-old Chevy with a V8 engine held together with wire and prayers? A methane belching team of oxen? A solar-powered monorail system? On balance, my guess is that the increased supply of cars leads to increased emissions, but I don't have solid empirical evidence. 

Even if importing cheap Japanese used cars into, say, Zambia leads to increased emissions, is it a bad thing? Zambians love their "new reconditioned" Japanese cars, just as Canadians would, if we were able to tap the cheap used Japanese car market. [We drive on the right, Japan drives on the left, and although some high end specialty used Japanese cars can be found in Vancouver, they are rarely seen elsewhere in Canada.]

Cars are a key part of Zambia's transport system. "Traders", mostly women, drive around the country, and make money through arbitrage - buying goods that are relatively cheap in Lusaka, driving down to Livingstone and reselling them, then stocking up with whatever is relatively cheap in Livingstone, and driving back to Lusaka. Cars also play a key role in the tourism industry - every taxi is a Japanese import.

One could argue that cheap cars fuel economic development. Even if they lead to an increase in Zambian carbon emissions, so what - Zambians still produce relatively few carbon emissions on a per capita basis. From a global perspective, surely the responsibility for reductions in carbon emissions should lie with those, like globe-trotting academics, who produce high levels of emissions - concern for the environment shouldn't trap Africans in poverty.

In short, it's complicated. But like any economist, I'm a sucker for an example of a policy with unintended consequences.

Comments

[Thomas]

Quite a few used Japanese Priuses (Priii?) end up as taxis in New Zealand, which presumably reduces emissions relative to what the taxis would otherwise be. Otherwise, the Japanese imports probably don't have a huge impact on the level of car ownership here.

[Nick Rowe]

Wow! How did you know? I just put a used Japanese Domestic Market engine and transmission in my MX6!

They don't just export their used cars. They sometimes export just the engines, and a few other parts too. Or, with a front wheel drive car, they export the front half of the car. This is (usually) what happens for Canada and other countries that drive on the right.

In my case, I had 270,000kms on the car, and I think the previous owner had not always done the oil changes regularly (and had rested his hand on the gear shift while driving, which had worn out the synchros in third), so it was burning some oil, mostly from worn valve seals. I could have kept driving it as is. But a local shop would swap in a low mileage JDM engine and transmission for $2,000, labour included, so I did it (and had the clutch changed too while it was easy to do.)

In my case pollution went down, because the "new" engine doesn't smoke on startup. And it has a higher compression ratio (for some reason, JDM Mazda K-series engines seem to have higher compression ratios than export versions) so should use less gas.

It all depends on the counterfactual. If the counterfactual had been that I had scrapped the MX6 (sniff, never!) it might have been different.

And I wonder about the pollution from building a new car vs taking and old car off the road.

But yes, it really doesn't make sense to have stricter rules in one country than in another, except where the concern is local pollution (which I suppose it partly is). This is a great example of a general equilibrium question. And also, I think, the Theory of Second Best.

[hix]

Shifting the environmental impact of old cars from extremly dense populated Japan to much less dense populated Australia looks alright to me. Cars have a rather unhealthy impact that is limited to their direct surrounding in addition to global warming effects. People in Australia New Zealand or Zimbabwe probably wont acumulate critical levels in their body with less strict environmental standards.
Overall, im rather convinced that environmental standards for cars are far too low just about everywhere, but that is another topic.

[Tzimiskes]

I've always thought that Japanese emission controls have very little to do with emissions and a lot to do with providing an indirect subsidy to auto manufacturers, which makes me doubt that the emissions controls will be anywhere near a first best solution to pollution control. Though with the intense crowding of parts of Japan, and the impact of auto exhaust on nearby communities, it may be that there is some environmental benefit that accrues to Japan distinct from the impact on global pollution.

[Frances Woolley]

hix - "Cars have a rather unhealthy impact that is limited to their direct surrounding"

That's an important point I hadn't thought of. The issue with Japan is not so much the level of emission standards as the control regime - that the Sha-ken inspections are so expensive.

Tzimiskes "I've always thought that Japanese emission controls have very little to do with emissions and a lot to do with providing an indirect subsidy to auto manufacturers"

That doesn't surprise me given what I could find out about the Sha-ken system on-line - do you have any links or info that would support this impression?

Nick - that's an excellent price for the new engine and transmission - less than I paid for just the new transmission on the Matrix - guess it's a matter of supply and demand given the tendency of those Matrix manual transmissions to burn out at low mileages.

[Nick Rowe]

Frances: yes, it's very much supply and demand. When I wanted to replace the engine on my old Mitsubishi/Eagle, the price was much (about 3 times IIRC) higher. The reason is almost certainly that those Mitsubishi engines are often turboed, and tuners would get too enthusiastic and turn up the boost too high, destroying their engine and creating a big demand for used ones.

BTW, we have a similar sort of question in Ontario vs Quebec. Ontario has bi-annual safety and emissions inspections on older cars, and Quebec has none. If I buy a used Quebec car there is no inspection. But when you "import" a car into Quebec, you have to have it inspected.

[Frances Woolley]

Nick, now what possible rationale (political, economic, environmental or otherwise) could there be for that Quebec/Ontario thing?

[K]

Can someone explain the right model of this? If you impose a tax on a capital asset if it's more than a certain age, then people will replace it at a higher rate but presumably there will be less of that asset around. But if the tax is only imposed on some people then the untaxed will buy the old capital. So now there will be *more* total capital around as a result of the tax. Is that wrong?

Is the answer that transporting Aussies is not as valuable an output as transporting Japanese people, so that's where the value is lost: I.e. we are getting less capital rather than more?

[K]

Or put it this way: If the tax was imposed on Aussies instead of Japanese, would the amount of cars still increase? Or does it only happen if you impose the tax on the group with the highest utility (or lowest demand elasticity?) for the output?

[jb]

Wonder how much filth those big containerships belches out on their ocean crossings?

[K]

jb: "Wonder how much filth those big containerships belches out on their ocean crossings?"

Apparently about 10 gCO2/km-tonne. So assuming 10,000km and a 2 tonne vehicle we get 200 kg CO2. Equivalent to the emmisions from about 100 liters of gasoline. If the car drives another 100,000 km then the shipping is only 1% of the future CO2 output of the vehicle.

[K]

Apparently, according to the same document, vehicle shipping is more like 32-57 gCO2/km-tonne so 3-6 times as much as I calculated above. So not nothing, but not huge either.

[Determinant]

Why does supply and demand matter? A person in Zambia buys a car. The key to emission control is for them to buy a well-maintained car with low emissions. Emissions only go up if they buy a smoking smog-belcher.

The answer is technology and maintenance, not economics.

Nick:

I realized that Quebec has an inspection requirement on out-of-province cars when I checked, because I may move to Quebec and have to register my car there. Why they want this I don't know. My guess is they aren't used to a lot of interprovincial migration because the are few SAAQ or other government offices in Montreal that handle direct exchange of other province's licences, plates and registrations. And of course health cards, the tag-along.

[Neil]

It would be interesting to map out the whole cycle. Used Japanese car is purchased by someone who would otherwise buy a used car in worse shape. The worse shape car is then cheaper, and is purchased by someone who would otherwise buy a car that burns oil and is barely mechanically sound. The relevant question is whether that car that is barely mechanically sound is now sufficiently worthless that it's pulled off the road, and stripped for scrap metal and parts, or if it's sold to someone who would otherwise not buy a car at all.

It's sufficiently far removed that I can't imagine a way to come to a conclusive answer on this, but there's certainly a case to be made that exporting modern cars at low prices may ultimately reduce global emissions.

[Nick Rowe]

I think that K @11.09 has the right model, at least as a benchmark starting point.

Assume Aussies and Japanese are identical. And have the same population. Assume stationary state. Assume that new and old cars are identical, except for maintenance costs which rise with age until the owner chooses to scrap the car. Assume zero shipping costs.

Start with no taxes. All cars are scrapped at age (say) 20.

Now Japan imposes an annual tax on cars older than 10 years. The equilibrium is that all the new cars are sold in Japan, and at 10 years old are sold to Australians, who scrap them at 20 years old, and nobody pays the tax. Zero effect on the total number of cars, and zero effect on the age at which cars are scrapped.

Now assume Japan starts the tax on cars older than 9 years. So the Japanese pay the tax for some months. That reduces the total number of cars produced and sold. That means the marginal benefits of owning a car in Australia increase. So now the Australians keep the car for longer than 20 years. Fewer cars, but older cars.

[jb]

Say you got a company which is represented in most european countries and you provide your ( not all , but some ) employees with free transportation (company car). Where would you buy your company cars ? and could there be legal impediments to the economic calculus. Even within the EU?

On shipping: I'm no treehugger but this surprised me when I first read it:
http://www.treehugger.com/cars/just-15-of-the-worlds-biggest-ships-may-now-emit-as-much-pollution-as-all-the-worlds-760m-cars.html

Kinda like the syringe tide and Great Pacific Garbage Patch

[hix]

Company car purchases in Europe are mostly new Mercedes, BMW and Audi. They are bought or leased at a price point that is much lower than the one charged to private customers.

[Mitch]

On the other side of this coin, the tight standards encourage Japanese manufacturers to invest in lower-emitting vehicle technologies, and those technologies are then exported around the world (either directly or indirectly) for a cleaner-burning global auto fleet. So, yes, this is a fantastically complex question.

[Frances Woolley]

Sorry, I've been in transit (now back in the Northern hemisphere), and can't respond to all the comments.

Mitch, the issue is not so much the emission standards as the Sha-ken regime through which the standards are enforced. My 10 year old Matrix sailed through its last emissions test with scores of "zero" for some of the pollutants. But it might have failed a Sha-ken inspection because it has a bashed up front fender.

Nick "Assume Aussies and Japanese are identical. And have the same population. Assume stationary state. Assume that new and old cars are identical, except for maintenance costs which rise with age until the owner chooses to scrap the car. Assume zero shipping costs."

To have Sha-ken causing *more* pollution some of those restrictions would have to be relaxed. In the model that's in the back of my mind, Zambians keep cars on the road long after Japanese would scrap them because of different emissions standards, different demands for automotive quality, and different costs of automobile maintenance. I'm also imagining liquidity constraints that would make a new Japanese car impossible for a middle class Zambian to finance, but a "new reconditioned" one affordable. I'm also imagining positive shipping costs.

I think that would do it. Say for the first 10 years of a car's life it is of high quality, and the last 4 years it is of low quality. Japanese don't drive low quality cars, so after 10 years Japanese cars go for export/scrap. Absent Sha-ken, and with positive transport costs, a 10 year old car may well be worth more for parts in Japan than as a used car in Zambia. Sha-ken does two things. It imposes a "tax" on owning an older car. That has two effects. First, it takes older cars off the road. Second - and here it's important that Sha-ken is about inspecting the whole vehicle - I'm wondering if Sha-ken makes it more difficult to install used parts as opposed to new ones, reducing the scrap value of older cars. I wasn't patient enough to look through these guides here http://www.navi.go.jp/english/pdf/ServiceGuide.pdf and http://www.navi.go.jp/english/inspection/index.html but perhaps they may say something about it.

[GA]

Strangely, large parts of Russia are also dominated by used Japanese cars - not surprisingly, those that are further east. (Off topic, I've been trying to determine where the 'right-hand drive' line is, where cars become majority right-hand drive - right now all I can tell you is that it is east of Irkutsk and west of Khabarovsk). Since it varies geographically, one could look at the data and see if anything useful pops out.

To add a few thoughts:
-I think the safety element may be more important for developing countries than emissions. The used Japanese cars can represent a significant improvement in safety standards, and I'm convinced it's saved lives in Russia.
-Emissions will be harder to look at because the fuel used has a huge impact - and at the extreme might simply destroy the emissions control system. (For Russia, the Far East and parts of Siberia have much less quality fuel to the higher standards, particularly for diesel). While that might drive demand too for better fuel, my guess is government regulations drive the fuel market much more than the other way around.
-To some degree the same issue exists for used European cars (joke about a Russian tourist in Germany who sees a German grinding the gears on his Audi - 'hey, be more careful - we'll be buying that from you in a few years'), but without the Japanese testing regime.

[Frances Woolley]

GA "The used Japanese cars can represent a significant improvement in safety standards"

Thanks for these observations. Interestingly, what made curious about the cars in the first place was that they had airbags, which I wouldn't expect to see in Zambia (This is a place with minimal safety regulations. At the edge of the Victoria Falls gorge, where the rocks soaking wet from the spray from the Falls, and it's a sheer drop off to certain death, most of the safety rails are gone). So you may well be right about the safety thing.

The worst car we rode in during our time in Africa was an old Mercedes with engine troubles (this was in Soweto in SA). My guess is that owners kept it on the road partly because of the status value of a Merc, and partly because even an inadequately maintained Merc will last for years. I'd imagine that similar considerations keep German clunkers on the roads in Russia.

[Frances Woolley]

GA - though the safety issues associated with RHD cars in places where people drive on the right hand side of the road are serious too. Some countries restrict import or use of the "wrong" type of cars.

[jb]

Wont hog much of your precious time.

Just say this:

Swedish postal service have used right hand driven vehicles for years, and the danish postal service have just started using them, with the same advice as they give to cab drivers in St. Croix namely: "Keep yours ass to the grass"

Due to the different tax regime in the european countries the price for getting a car delivered on the road differs. The countries with the heaviest taxation on these are often the ones where the price ex. taxes and duties are the lowest.

Therefore one can export one's car, get a tax refund and sell the car for a higher price abroad.

Since only people who are actually living in the country can drive a car purchased and registered legally, companies in europa cannot shop around as they see fit.

[valuethinker]

Japanese emission controls exist because Japan had the worst urban pollution problem in the world in the early 1970s.

Go back to the pictures of Tokyo then. One was the smog.

Two the traffic police carried little oxygen bottles, or had little booths with oxygen supplies, to keep them going whilst regulating traffic.

Any 'conspiratorial' theory about subsidies to manufacturers is basically smoking it, compared to what was actually going on.

And good history of environmental movements (John McNeill 'Something New Under the Sun: an environmental history of the 20th century' is a good place to start, well referenced) or anyone who remembers the time can tell you that.

Since the alternative in Zambia is old and battered Land Rovers, yes having good Japanese used cars is a net positive. Better fuel economy, less pollution, and more reliable-- therefore less consumption of resources in repair and maintenance.

[global market report]

Good read! I really learned a lot from this blog post. brilliant, keep up the good work