As Income Rises in China, So Does New Vehicle Ownership—and Greenhouse Gas Emissions
New research from Resources for the Future and the University of Maryland finds that rising income in China is leading to more vehicle purchases than expected, signaling that the country needs more aggressive climate goals.
As China experiences rapid economic growth, a new working paper from Resources for the Future (RFF) and the University of Maryland finds that vehicle ownership is growing at a faster rate than previously forecasted—a sign that the country’s climate policies will need to be more aggressive to account for the transportation sector’s rising emissions.
The new working paper finds a direct relationship between income growth and the rate at which new vehicles hit the road in China. Using city-level data on new vehicle sales and income from 2005 to 2017, researchers Joshua Linn and Chang Shen estimate that a 1 percent increase in income causes a 2.5 percent increase in total new vehicle sales.
Past projections anticipated that China's vehicle ownership growth rate would follow patterns set by Japan and European countries. But according to Linn and Shen’s estimates, it appears that China’s ownership rate is growing much more rapidly. Recent projections in the literature understated actual car sales by 36 percent and carbon dioxide (CO2) emissions by 18 million metric tons in 2017.
“These findings reveal important implications for China’s commitment under the Paris Agreement,” paper coauthor and RFF Senior Fellow Joshua Linn said. “More cars than expected mean more emissions than expected.”
Global oil consumption and greenhouse gas emissions from transportation are expected to grow, with historically low-income countries responsible for most of that growth. China’s meteoric rise shows the importance of accurate projections in informing climate commitments in rapidly changing economies.
“As far as I’m aware, there is little research out there that examines the causal effect income has on car ownership. Our paper is one of the first,” Linn said. “As the world’s most populous nation, and the global leader in greenhouse gas emissions, China is a very influential player on climate and economic issues. It’s important that we have comprehensive research to accurately inform emissions reduction goals not just in China but around the globe.”
For more information, read the working paper, “The Effect of Income on Vehicle Demand: Evidence from China’s New Vehicle Market,” by Joshua Linn, senior fellow at Resources for the Future and associate professor at the University of Maryland; and Chang Shen, recent PhD recipient from the University of Maryland.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
For more information, please see our media resources page or contact Media Relations and Communications Specialist Annie McDarris.
