Exposure to air pollution is associated with numerous effects on human health, including pulmonary, cardiac, vascular, and neurological impairments. The health effects vary greatly from person to person. High-risk groups such as the elderly, infants, pregnant women, and sufferers from chronic heart and lung diseases are more susceptible to air pollution. Children are at greater risk because they are generally more active outdoors and their lungs are still developing. Exposure to air pollution can cause both acute (short-term) and chronic (long-term) health effects. Acute effects are usually immediate and often reversible when exposure to the pollutant ends. Some acute health effects include eye irritation, headaches, and nausea. Chronic effects are usually not immediate and tend not to be reversible when exposure to the pollutant ends. Some chronic health effects include decreased lung capacity and lung cancer resulting from long-term exposure to toxic air pollutants. The scientific techniques for assessing health impacts of air pollution include air pollutant monitoring, exposure assessment, dosimetry, toxicology, and epidemiology.

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Figure:Health Effects caused by Air Pollution

Although in humans pollutants can affect the skin, eyes and other body systems, they affect primarily the respiratory system. Air is breathed in through the nose, which acts as the primary filtering system of the body. The small hairs and the warm, humid conditions in the nose effectively remove the larger pollutant particles. The air then passes through the pharynx, esophagus, and larynx before reaching the top of the trachea. The trachea divides into two parts, the left and the right bronchi. Each bronchi subdivides into increasingly smaller compartments. The smallest compartments of the bronchi are called bronchioles, which contain millions of air sacs called alveoli. Together, the bronchioles and alveoli make up the lungs.

Both gaseous and particulate air pollutants can have negative effects on the lungs. Solid particles can settle on the walls of the trachea, bronchi, and bronchioles. Most of these particles are removed from the lungs through the cleansing (sweeping) action of "cilia", small hairlike outgrowths of cells, located on the walls of the lungs. This is what occurs when you cough or sneeze.

A cough or sneeze transports the particles to the mouth. The particles are removed subsequently from the body when they are swallowed or expelled. However, extremely small particles may reach the alveoli, where it takes weeks, months, or even years for the body to remove the particles. Gaseous air pollutants may also affect the function of the lungs by slowing the action of the cilia. Continuous breathing of polluted air can slow the normal cleansing action of the lungs and result in more particles reaching the lower portions of the lung.

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Figure:Human respiratory system
The lungs are the organs responsible for absorbing oxygen from the air and removing carbon dioxide from the blood-stream. Damage to the lungs from air pollution can inhibit this process and contribute to the occurrence of respiratory diseases such as bronchitis, emphysema, and cancer. This can also put an additional burden on the heart and circulatory system.

In Table 1 we summarize the sources, health and welfare effects for the Criteria Pollutants. Hazardous air pollutants may cause other less common but potentially hazardous health effects, including cancer and damage to the immune system, and neurological, reproductive and developmental problems. Acute exposure to some hazardous air pollutants can cause immediate death.

Human health effects associated with indoor air pollution are: headaches, tiredness, dizziness, nausea, and throat irritation. More serious effects include cancer and exacerbation of chronic respiratory diseases, such as asthma. Radon is estimated to be the second leading cause of lung cancer in the U.S. Environmental tobacco smoke causes eye, nose and throat irritation, and is a carcinogen. Asthma, particularly in children, is associated with poor indoor air quality.

Ozone pollution is the biggest problem. Ozone pollution is really an increase in the concentration of ozone in their air at uv ground level. Because the sunlight has a critical role in its formation, ozone pollution is principally a daytime problem in the summer months. Ground-level ozone is produced when sunlight combines with hydrocarbons and nitrogen oxide, two compunds produced by cars, trucks, factories, and power generating plants and found wherever gasoline,diesel or natural gas are combusted. So these gases are going to affect our life.

Another effect is that the nature is dying. Some air pollutants harm plants and animals directly. Other pollutants harm the habitat, food or water that plants and animals need to survive. When air pollution causes acid rains, plants that rely on rain water to live and grow are endangered. However all these pollutants are causing changes to the places where plants and animals live around the world.

The next effect are illnesses. People have no choice but to breathe the air around them. When it is polluted, they breathe in ozone, particles, and harmful gases that can hurt their lungs, heart and overall health. Air pollution can cause burning eyesand breathing problems, such as asthma or severe bronchitis. Also ultraviolet radiation causes skin cancer.

In conclusion, pollution is really a big problem in the world beacuse it is causing ozone depletion, nature dying and many different illnesses. People are creating new projects that will be good for the humanity. But If we dont take conscience about these problems, maybe in the future we will have more problems. So we need to try to avoid pollution.

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Air pollution concentrations have been rapidly increasing in the major urban areas of Brazil caused mainly by the increasing use of vehicles. Policies to control car emissions in Brazil have relied basically on mandatory emission standards and subsidies for specific cleaner technology resulting in substantial decrease of car emission rates. Nevertheless, taxes on car sales, differentiated by vehicles' size and fuel, have also influenced car emission patterns. This paper analyses the compliance trend of the Brazilian fleet with environmental standards between 1992 and 1997. We find that larger automobiles had the fastest compliance schedule while popular models adjusted very slowly. Also gasoline-fuelled models had a faster adjustment pattern than ethanol cars. Additionally, we analyse the current relationship between pollution emissions and car characteristics in order to orient policy formulation. We find a positive relationship between emissions rates and horse power, concluding that although the current value-added sale car tax is not environmental harmful, a tax differentiating clean from dirty models, within each tax bracket, could create substantial incentives for emission control in the future.

Urban air pollution is a serious environmental problem in developed as well as in most developing countries. In the case of Brazil, air pollution concentrations have been rapidly increasing in the major urban areas over the last decades. As elsewhere, this expansion has been caused mainly by the increasing use of vehicles. Today, emissions from vehicles are the major source of air pollution in Brazil's largest cities. In 1997 in São Paulo, for example, private cars were responsible for approximately 75% of carbon monoxide (CO), 73% of hydrocarbons (HC), 23% of nitrogen oxides (NOx) and 10% particulate matter (PM)

Costs associated with high air pollution concentrations in large cities are known to be important. Human health costs predominate, and range from eye irritations to respiratory problems and increasing cancer rates, all of which induce direct and indirect costs to society2.

They also estimate the health costs associated with concentration levels in excess of air pollution standards, finding a loss of approximately US$ 700 million per year in the early 1990s.

Even when consumers can perceive individual emission damage, they are unable to reduce alone the aggregate social emission costs. Consequently, their preferences will usually not consider fuel and car cleanliness. In the presence of this negative externality, environmental regulation is required.

If we were able to measure emissions by individual cars, the first best incentive option for car emission control would be the imposition of a Pigovian tax on each source according to its marginal contribution to air pollution damages. This would allow flexibility for car owners in the choice of emission reduction strategies. However, such first best approaches can incur high administrative cost. As put by Innes (1996), even if tamper-resistant emissionmeasurement from tailpipes were available at reasonable costs, such devices do not detect important non-tailpipe pollution and, therefore, high costly reliable periodic car monitoring would be required. Consequently, the application of car emission control policies would have to reckon on regimes which do not require direct emission monitoring.
When emission output measurements are difficult, the economic literature on MBIs proposes instead that regulators may apply first best taxes on the use of inputs and products which are related to emissions. For car emissions, fuel and automobile taxes are good candidates for this option. Fullerton and West (1999 - hereafter FW), have derived a set of fuel and car optimal taxes which are able to mimic, at least in theory, the unavailable tax on emissions. In order to derive a closed form solution, FW consider emissions per gallon (EPG) and miles per gallon (MPG) only to depend on si, the size of the car. Under these specific technological conditions, FW propose a closed form solution for a fuel tax (tg) differing according to characteristics of the vehicle at the pump.
The owner of car model i, would pay a tax given by
)( ) ( i i gi s MPG s EPM t : = where :, represents the marginal social cost of a unit of emissions and EPG and MPG represent car features. More generally, we could specify such a tax to be a function of other car characteristics which are likely to affect EPG and MPG, as well as emission features of different fuel types.
Admitting regulators know the mileage consumption and useful life of each car model i owned by consumer j, an equivalent car sale tax would consist of the present value of the above fuel tax. This car tax could be, instead, applied periodically for licensing purposes, and its value would be set by monitored mileage at that period.
Both fuel and car taxes would make consumers perceive the emission-increasing cost of extra mileage consumption and recognise the emission-reducing benefits of fuel cleanness and economy as well as car pollution abatement devices.
Note that under this approach regulators must know the marginal social cost of a unit of emissions ( :). Moreover, this parameter will be location-specific since marginal damages are dependant on total pollution charges and the environment assimilative capacity which, in turn, varies according to atmospheric variables (e.g., wind speed, temperature, humidity, etc).
Suppose, however, that regulators know : and location-specific taxes can be applied.
Although the fuel tax is simpler than the equivalent car tax, it would still require car features to be identifiable at the gas station. Again such an approach is likely to generate high administrative costs in order to be feasible and reliable. Therefore, if we cannot mimic the first best solution with alternative taxation schemes, we would have to rely on second best market instruments. The ideal second best mechanism should create price incentives for

consumers to drive fewer miles and, at the same time, buy cleaner cars. While the former decision is related to fuel use, the latter works through car price differentiation3.
A car tax based on the estimation of a vehicle's annual emission is proposed by Eskeland
(1994) and Sevigny (1998). Emission rates per mile would be estimated based on car characteristics, and miles travelled could be measured by the change in the vehicle's odometer in a given year4. What makes this proposal different from the first best alternative proposed by FW is the lack of knowledge on each specific car's EPM. While FW's model assumes that it is possible to estimate individual EPM for all car models in order to charge an emission gas tax at the fuel pump, Sevigny (1998) only expects to be able to derive average
EPM figures. Again, implementation may prove to be costly for the case of odometer measurement procedures.
An alternative constrained optimal regulation is proposed by Innes (1996). A combination of taxes on gasoline and automobiles could be combined with a government fuel content standard. The fuel tax would be independent of individual automobiles, but the car tax would depend on auto characteristics (eg, power, size, style), fuel economy and abatement features.
Since mileage demand is highly correlated with automobile features, the automobile tax would also affect miles driven. Moreover, additional incentives could be created. In a dynamic setting, a car sale tax could be partially returned to consumers as incentive for scrapping older models according to the abbreviation of the car's useful life5.
For the previous mechanism, a subsidy for pollution control equipment is relatively simple to define since control equipment such as catalytic converters and filters are directly observable.
The same applies for fuel, insofar as that emissions will rise more or less proportionately with fuel consumption for a given vehicle and given driving conditions6. On the other hand, a tax on car characteristics requires a periodic identification of the relationship between car characteristics and emissions.
In general, market based instruments are difficult to implement and regulators wishing to apply them would have to combine tax schemes with technological and emission standards.
This approach does not maximise social welfare by setting optimal levels of pollution.
Rather, the aim is to use pricing mechanisms to increase cost-effectiveness in achieving a certain standard compliance regarded as desirable7. That is, once environmental goals are defined, economic instruments can reduce the social costs of achieving them. The rationale is rather simple. Since users face different marginal control cost schedules, pollution taxes varying directly with users' pollution levels will make users adopt control levels up to the point where pollution control costs are equal, at the margin, to non-compliance tax costs.
Taxes are set at certain level which will make the maximised individual decisions, in aggregate, to meet the desirable standards. Society will first start to control from the leastcost users which will reduce total control cost. In this case, individual emission standards are
3 See Johnstone and Karousakis (1998) for a review.
4 This tax would take the form of Annual tax =, VMT cEPM bEPM aEPM * ) ( 3 2 1 + + where EPM is the emission per mile, VMT is the vehicle mile traveled and a, b, c are tax rates set to induce the desired level of abatement for each pollutant.
5 Road fees, varying with air pollution concentration levels and car's characteristics, are also regarded as possible second best options, although they may induce longer travel distances to avoid charges.
6 See Seroa da Motta and Mendes (1996) for an analysis of fuel taxation in Brazil.
7 Desirable here may mean either one standard politically acceptable or targeted at one specific damage. In the case of urban pollution, human health damages are usually targeted.
CREED Working Paper Series No 29 4 dropped out and regulators become only concerned with ambient standards which reflect total emissions. Instead of setting prices, regulators may distribute pollution permits to users, as a share of the desired total emission targets and allow these permits to be traded among users. This mechanism creates incentives for achieving the same marginal cost equalising outcome given the competitive structure of the prices emerging from the permit market transactions.
Apart from cost-effectiveness benefits, such economic instruments can generate revenue. In the case of pricing mechanisms, note that users with non-compliance will face the respective tax costs and thereby generate a tax revenue. In the case of tradable permits, they can be distributed through auctioning mechanisms8.
Car emission control policy in Brazil is basically defined on mandatory emission standards.
Since 1988 the Brazilian governmental authorities have implemented a regulatory mechanism called The Vehicle Air Pollution Control Programme (PROCONVE), establishing maximum pollution emission standards (in grams per kilometer) for new vehicles entering the market.
The program has been very successful in reducing emissions per kilometer for new car models. Nevertheless, as with any command and control approach, it is inflexible and increases the costs of reducing pollution.
This paper analyses the evolution of average emissions in the Brazilian fleet between 1992 and 1997 (the final compliance date). Together with environmental policy, car tax structures have been differentiated by car characteristics such as size and fuel use, in order to accommodate sectoral policy aims. Therefore, government initiatives have affected the car market and consequently the emission pattern of new automobiles. We try to relate these sectoral policies with the average emission compliance trends comparing the average emission changes across car sizes and fuel types. Additionally, we analyse the present relationship between pollution emissions and car characteristics in order to orient current policy formulation. Our analysis is based on emission data recorded from laboratory tests undertaken by the São Paulo Environmental Agency (CETESB) which electronically measures emissions of HC, CO and NOx for each car model along with the model's characteristics. The rest of this paper is structured as follows: the next section presents the Brazilian regulatory framework for car pollution control and the car tax structure. This is followed by a description of our database and model characteristics. Section 4 presents the econometric results; concluding remarks and policy recommendations are discussed in the final section.
8 Cost-effectiveness of permits does not depend on permit auctioning. Freely distributed permits have different equity effects, although they are equally cost-effective if transactions costs are assumed not constrained.

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