Pricing Pollution Control

Article excerpt

As part of an effort to explain more precisely how the Consumer Price Index (CPI) fits into a cost-of-living framework confined to market goods and services, the Bureau of Labor Statistics has reviewed its treatment of mandated anti-pollution measures. After careful review, the BLS has decided that it will no longer treat modifications to goods and services that are made solely to meet air quality standards as quality improvements in the CPI. Price increases associated with such modifications will be treated as increases in the index. This decision should not be construed as a judgment that the reduction of air pollution from automobiles is without value. Effective with the data for January 1999, however, the CPI will no longer make quality adjustments for changes in vehicle or motor fuel characteristics arising from air-pollution mandates.

Historically within the CPI, quality adjustments for anti-pollution measures have been made to the new car (or new vehicle) component since 1969 (automobile model year 1970), with their estimated dollar effect published annually. …