”LOW EMISSION ZONES”: Incentives to switch to green vehicles produce big health benefits

”Low emission zones” (LEZs) in major cities like London and Berlin can reduce life-threatening air pollution dramatically by encouraging drivers to switch to cleaner, greener vehicles. That is the central conclusion of research by Hendrik Wolff, published in the August 2014 issue of the Economic Journal.

His study shows that the health benefits of LEZs from cleaner air in German cities have turned out to be worth twice the costs of upgrading the country”s fleet of private and commercial vehicles. What”s more, German cities that have so far decided not to introduce an LEZ but engaged in other methods (such as building ring roads and enhancing public transport) have experienced no decrease in pollution.

Europe has over 100 LEZs, which consist of larger urban areas that either completely ban or charge a high price to ”dirty” vehicles entering the LEZ. The largest LEZ in Europe is in Greater London, with a population of over eight million people. All trucks of emission categories I-III pay a fee of £250-500 per day to enter the LEZ of London; only the cleanest vehicles (category IV and higher) can enter without a charge.

In Germany, Berlin has the largest LEZ, with a population of 1.1 million people. Here drivers do not have the option to pay a fee, but the LEZ of Berlin completely bans all but the cleanest vehicles from entering the city of Berlin. Clearly, this ban is controversial, because of their high costs to drivers and business owners. There are also concerns that dirty vehicles increasingly drive around the LEZ, increasing air pollution in the suburbs.

The backbone of LEZs is the 2005 Clean Air Directive of the European Commission: increased public health concerns have considerably sharpened the role of this policy. In particular, there is a focus on PM10 (the class of particulate matter smaller than 10 micrometers), a major air pollutant from vehicle emissions. Because PM10 can enter the lungs and bloodstream, it is often considered the most lethal air pollutant. In the European Union (EU) alone, PM10 is estimated to cause 348,000 premature deaths annually.

To put this in context, ozone – Europe”s second most deadly air pollutant – only causes about 21,000 premature deaths. In response to these health risks, virtually every major city in Europe is now affected by this policy. The most drastic measure of the clean air action plan is to implement an LEZ.

In Germany, to deal with the large number of cities exceeding the EU threshold, the government has categorised vehicles into four mutually exclusive classes of PM10 emissions. All 46 million German cars, buses and trucks are required to display a coloured windshield sticker indicating its PM10 pollution class. As of 2014, 78 German cities have implemented (or are preparing to implement) LEZs banning vehicles based on the colours of these stickers.

But these zones have been controversial because of the costs imposed on drivers and especially truck companies, for whom upgrading fleets to the appropriate sticker can be expensive. According to a 2009 online survey, over 91% of Germans disapprove of LEZs, considering them too bureaucratic and likely to have little effect. In an earlier survey, 70% of drivers said that they might drive around LEZs to avoid upgrading their vehicle.

Despite these criticisms, LEZs have become a popular quick fix for local governments struggling to avoid the large financial penalties imposed for exceeding the EU limits. For example, a recently announced penalty for the city of Leipzig is €700,000 ($1,050,000) per day, because of non-compliance with the EU clean air regulation.

Using new administrative datasets from Germany on all vehicles and their emission category as well as ambient air pollution data, this study finds that LEZs in Germany have reduced PM10 by 9%. It also rejects the hypothesis that dirty vehicles contribute to higher pollution levels by increasingly driving longer routes outside of the LEZ.

Moreover, the research finds that cities that decided not to introduce an LEZ but engaged in other methods, such as building ring roads and enhancing public transport, have experienced no decrease in pollution.

In terms of the adoption of cleaner vehicles, the study finds that LEZs give drivers more of an incentive to purchase low emission vehicles the closer they live to an LEZ. In particular, green commercially used vehicles (whose drivers presumably depend more on access to city centres) increased sharply by 88%. While privately used green vehicles increased by only 5%, this still represents a substantial shift in the spatial vehicle fleet composition due to the clean air regulation.

Overall, health benefits of nearly two billion dollars have come at a cost of just over one billion dollars for upgrading the fleet of vehicles in 2008 in Germany.

”Keep Your Clunker in the Suburb: Low Emission Zones and Adoption of Green Vehicles” by Hendrik Wolff is published in the August 2014 issue of the Economic Journal. Hendrik Wolff is in the Department of Economics at the University of Washington.

Hendrik Wolff

University of Washington | +1-510-220-7961 | hgwolff@u.washington.edu