Effectiveness, Spillovers, and Well-Being Effects of Driving Restriction Policies

By Aleksandar Zaklan, Luis Sarmiento, and Nicole Wägner

Air pollution is a well-known source of welfare losses, primarily arising from negative impacts on human health. Exposure to air pollution not only triggers cardiovascular and respiratory diseases leading to premature deaths, it also has adverse impacts on related outcomes, like hindering the process of human capital formation through school absences, limiting labor supply at the intensive and extensive margin, as well as decreasing labor productivity.

Despite improvements in air quality across Europe in recent decades, air pollution continues to exceed the regulatory limit values in many regions. Pollution levels are especially high in urban agglomerations, with tailpipe emissions from motor vehicles being a primary source. Consequently, driving restrictions, like Low Emission Zones (LEZs), are a common policy response aimed at improving air quality in urban areas. LEZs restrict vehicles from entering specific geographical areas based on their emission intensity.

BCCP Fellow Aleksandar Zaklan and co-authors Luis Sarmiento and Nicole Wägner conduct a comprehensive empirical analysis of LEZs in Germany to study the effectiveness and spatial spillover effects of driving restriction policies, as well as their impact on individual-level well-being and health. To identify the causal effects of the policy, the authors apply a recently developed estimator that accounts for staggered policy adoption and time-varying treatment effects. Using data on four criteria pollutants from the German Environment Agency, they confirm that LEZs are effective at reducing traffic-related pollution, specifically coarse particulate matter and nitrogen dioxides, whereas the concentration of ozone increases after policy implementation. The increase in ozone likely relates to policy-induced changes in the chemical balance with precursor pollutants and increases are detectable within a 25-kilometer radius of the LEZs.

Furthermore, the efficacy of LEZs is heterogeneous by season. They are especially effective at decreasing traffic-related pollutants during the winter season when vehicle engines tend to be less efficient and driving restrictions have larger marginal effects on traffic-related pollution. In contrast, the effect of LEZs on ozone levels is especially pronounced during the spring and summer when long sunshine hours and warmer temperatures accelerate the ozone formation process. 

Using data on individuals’ well-being and health outcomes from the German Socio-Economic Panel, the authors provide empirical evidence that persons dwelling inside LEZs experience a decrease in their life satisfaction after policy implementation, since the policy potentially forces them to retrofit their vehicles, buy cleaner vehicles, or switch to other transportation modes. These adverse well-being effects are especially severe among owners of diesel cars, because emission standards for diesel vehicles are stricter than for gasoline vehicles, and among working-age individuals (under 65 years) who have greater mobility needs than the older population.

With respect to health outcomes, the authors observe a significant drop in hypertension cases after LEZ implementation. These health benefits mostly accrue to people between 60 and 80 years old, while the effects for younger people are less pronounced. Nevertheless, these health benefits are not sufficient to counteract the negative well-being effects of LEZs. Taken together, the findings suggest that the negative well-being effects of driving restrictions are mainly borne by younger individuals, whose share of vehicle ownership is greater than for older people, whereas the health benefits accrue more strongly to the older population.

The study’s results confirm that LEZs are an effective mitigation policy for traffic-related air pollution, while also pointing toward the importance of considering their impact on bordering areas and secondary contaminants like ozone. Cities facing ozone problems, like Los Angeles, Mexico City, and Delhi, should consider the increase induced by LEZs before implementing this kind of driving restriction policy. Moreover, the decrease in average life satisfaction due to the LEZs’ introduction shows that such policies generate adverse well-being effects despite their health benefits, pointing toward the need of securing policy acceptance, e.g., by communicating the health benefits associated with these policies more effectively.

The full paper “Effectiveness, Spillovers, and Well-Being Effects of Driving Restriction Policies” is available as DIW Discussion Paper No. 1947.

This text is jointly published by BCCP News and BSE Insights.