KEEP YOUR CLUNKER IN THE SUBURB: LOW-EMISSION ZONES AND ADOPTION OF GREEN VEHICLES

Spatial distribution and leakage effects are of policy concern and increasingly discussed in the economics literature. We study Europe's most aggressive recent air pollution regulation: low-emission zones (LEZs) are areas in which vehicular access is allowed only to vehicles that emit low levels of PM10. Using new administrative data sets from Germany, we assess the effect of LEZs on air pollution and the spatial substitution effects in green versus dirty vehicles. Back of the envelope calculations suggest that health benefits of roughly 2 billion dollars have come at a cost of 1 billion dollars for upgrading the fleet of vehicles.