How Costly are Driving Restrictions? Contingent Valuation Evidence from Beijing

A common policy response to severe air pollution and traffic congestion in developing-country megacities is to ban the driving of vehicles with license plates ending in certain numbers on certain days. We use the contingent valuation method to estimate the costs to drivers of Beijing’s driving restrictions program, one of the world’s largest. Our study generates three main findings. First, costs are substantial: RMB 356 to 709 (US $54 to $107) per driver per year, which represents 0.5 to 1 percent of annual income, and RMB 1.6 billion to 3.3 billion (US $247 million to $493 million) per year for all drivers. Second, comparison of our cost estimates with estimates of the benefits of Beijing’s program from other studies suggests that the benefits exceed the costs. Finally, the costs per driver are significantly smaller than the costs (estimated using the same methods) of Mexico City’s program, which by most accounts has had zero benefits. These findings provide some of the strongest evidence to date that driving restrictions programs can, given certain conditions, have net benefits. They also suggest that relatively high program costs are not a necessary condition for significant program benefits—in fact, the opposite may be true.