Title

Hybrid Cars and HOV Lanes

Abstract

From 2005 to early 2007, California issued 85,000 Clean Air 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. These stickers could not be transferred between cars, but could be transferred between people by the sale of a car with a sticker on it. Through a hedonic model of car prices, we can estimate the willingness-to-pay for a Clean Air sticker and how it has changed over time. The program is set to be discontinued January 1, 2011 when the sticker will become useless. Thus, the price of the stickers should evolve over time. In March 2007, the willingness-to-pay for one of these stickers was approximately $6,100; as of June 2009 it is $600. This provides insight into how much drivers are willing to pay for congestion relief as well as information on consumers’ value for alternative fuel vehicles. The results suggest that policies allowing hybrid or clean cars to utilize HOV lanes with a single occupant may not be economically justified once opportunity costs are taken into account.