Vintage-specific driving restrictions

Local air pollution has led authorities in many cities around the world to impose limits on car use, increasingly by means of driving restrictions or license-plate bans. With some exceptions, these restrictions tend to be poorly designed creating incentives for drivers to buy additional, more polluting cars. We study vintage-specific restrictions that place heavy limits on older, polluting vehicles and none on newer, cleaner ones. A novel model of the car market and evidence from Santiago’s 1992 program, the earliest attempt to use vintage-specific restrictions, are used to show that these restrictions can be welfare enhancing by accelerating fleet turnover toward cleaner cars. These policies compare well to alternative instruments such as scrappage subsidies and pollution-based registration fees.