Using On-Board Diagnostic and Global Positioning System to Price Emissions from On-Road Heavy-Duty Vehicles

Economists have long urged governments to use Pigouvian taxes to efficiently reduce emissions. This has rarely happened, mostly because until now, technology has not existed to precisely measure in-use emissions by location and time. In recent years, increasingly sophisticated on-board diagnostic (OBD) devices have been required for cars and trucks to monitor engine operation and measure the in-use fuel consumption and emissions of vehicles. This paper proposes the use of Pigouvian pricing to reduce emissions from on-road heavy-duty vehicles (HDVs) by utilizing emission data from OBD devices and location data from global positioning system (GPS) devices. Thus, emissions can be measured and managed over time and space using geofencing. The authors address the feasibility of using OBD and GPS devices in this way, taking into account a monitoring system consisting of OBD and GPS, designated area, pricing scheme, and the relationship with other related policies. The authors conclude that emission data can be collected reliably using OBD technology, and that geofenced time-specific pricing policies are technically feasible.