Choosing to diet: The impact and cost-effectiveness of China?s vehicle ownership restrictions

Vehicle ownership restrictions have the potential to address multiple automobile-related externalities, including congestion, pollution, and greenhouse gas (GHG) emissions. We estimate the impacts of these restrictions in Chinese cities on the number of new cars sold, fuel consumption, and tailpipe GHG emissions. We apply synthetic control, regression discontinuity, and dynamic panel analysis to new car registrations and usage data in Chinese cities. Without restrictions, the number of new cars sold between 2011 and 2015 would have been 72% higher, while gasoline consumption and tailpipe GHG emissions would have been 50% higher in the restricting cities. We find the restriction-implied price per unit of externality produced to be high, roughly comparable to the price of gasoline in China but within the range of externality cost estimates reported in the literature. The findings are relevant to policymakers worldwide who may consider license restrictions to reduce automobile-related externalities.

Automated summary

Vehicle ownership restrictions have the potential to effectively address automobile-related externalities such as congestion, pollution, and greenhouse gas emissions. This study uses synthetic control, regression discontinuity, and dynamic panel analysis to estimate the impacts of these restrictions on new car sales, fuel consumption, and tailpipe emissions in Chinese cities. The findings suggest that without restrictions, new car sales would have been significantly higher, and so would have been gasoline consumption and tailpipe emissions. The implied price per unit of externality produced by these restrictions is relatively high, comparable to the price of gasoline in China. These results have important implications for policymakers worldwide in their efforts to reduce automobile-related externalities.