China’s cities have grappled with notorious problems of congestion and air pollution by using vehicle ownership restrictions. In the seven large cities with this policy, households cannot purchase cars freely, but must first win an auction or lottery. In this paper, we examine how the policy of vehicle ownership restrictions affects China’s new car sales, its fuel consumption, and its greenhouse gas emissions. We first examine the effects of vehicle ownership restrictions on China’s aggregate car sales. Utilizing transaction-level sales data of all new car sales in China between 2010 and 2015, we observe large discontinuities in the sales of new vehicles. We find that vehicle ownership restrictions reduced new car sales by 9.2% in China in 2015, a reduction of 1.86 million vehicles not purchased per year.
We then turn to the effects of vehicle ownership restrictions on fuel consumption and greenhouse gas emissions. To estimate the distance driven by car, we utilize a survey which asks new car buyers how many kilometers they traveled by car in each city. To estimate fuel economy, we examine the fuel economy of all new car purchases over our 2010 to 2015 time period. After performing a make-model match of sales to vehicle characteristics, we find that fuel economy in new cars sales improved by 3.6% over this time period.
Because of China’s market size and the magnitudes of cuts initiated by these ownership restriction policies, we find they have had global significance in terms of fuel consumption and greenhouse gas emissions.