Hybrid Cars and HOV Lanes

Abstract:     
From 2005 to early 2007, California issued 85,000 Clean Air Access stickers that allowed three models of hybrid cars to avoid congestion by driving on High Occupancy Vehicle (HOV or carpool) lanes with a single occupant. Using data on used car prices, we estimate the willingness-to-pay for one of these Clean Air Access stickers as approximately $625 per sticker per year, or $270 million for all 85,000 of the stickers which were valid for six years. Despite having a high value, the stickers were less effective at stimulating the demand for hybrid electric vehicles than an equivalent cash subsidy. Many stickers were given out to vehicles that had been purchased before the program started. While many hybrid owners were willing to pay upwards of $3,200 per sticker, for others the stickers amounted to an under-valued perk. Given the high value drivers place on HOV access, a more effective policy would sell space in the HOV lane to drivers of any vehicle and use the revenue to stimulate hybrid demand.

Number of Pages in PDF File: 49

Keywords: HOV lanes, hybrid cars

JEL Classification: Q28

working papers series