The Distributional Effects of Low Emission Zones: Who Benefits from Cleaner Air?

Abstract

Low emission zones (LEZs) are a key instrument for improving air quality in cities, but it remains unclear how their air-quality benefits are distributed. We study 58 LEZs implemented in Germany since 2008 and decompose their benefit incidence along three margins: policy exposure, heterogeneous treatment effects, and monetary valuation assumptions. Using high-resolution spatial pollution concentration and socio-economic data in a difference-in-differences design, we document systematic differences in estimated PM2.5 reductions across neighborhoods. Within LEZs, residents with a German name origin experience larger reductions in PM2.5 concentration. Residents with a foreign name origin, however, are substantially more likely to live in LEZ areas, resulting in larger average air-quality improvements from a nationwide perspective. Across income groups, low-income residents experience larger pollution reductions and a disproportionately large share of the monetized benefits within LEZs. Nationwide, however, benefit incidence is close to proportional, again due to offsetting policy exposure. Overall, these findings suggest that place-based environmental policy can have nuanced distributional implications across population groups and depend jointly on the three distributional effect margins we identify.