Vehicle ownership in China is poised to grow more than previous studies have estimated, raising questions about whether the country can meet its ambitious climate goals.
While China continues to experience rapid economic growth, Chinese President Xi Jinping has announced that the country aims to see peak carbon dioxide emissions prior to 2030. But recent research—coauthored by Joshua Linn, a senior fellow at Resources for the Future (RFF) and professor at the University of Maryland, and Chang Shen of the University of Maryland—indicates that an unexpected obstacle may hinder China’s climate goals. They find that vehicle ownership in China is growing at a faster rate than previously forecasted—a sign that China may need to be more aggressive with its climate policies to match the pace of the transportation sector’s rising emissions.
Past projections from the International Energy Agency and myriad researchers have assumed that the relationship between vehicle ownership and GDP in China would follow similar patterns as observed in Japan and European countries, per recent trends in China. But according to Linn and Shen’s estimates, vehicle ownership in China has grown much more rapidly than predicted, more closely resembling periods of early vehicle ownership in the United States.
Using city-level data on average income and new vehicle sales throughout China in 2005–2017, Linn and Shen find a direct relationship between income growth and the rate at which new vehicles hit the road in China. They estimate that a 1 percent increase in income prompts a 2.5 percent increase in new vehicle sales. Linn and Shen contend that recent forecasts have underestimated vehicle sales in China by about 36 percent and carbon dioxide emissions by about 18 million metric tons.
To date, not much research has examined the causal effect of income on car ownership; the new working paper is one of the first studies to address the causal connection. Linn and Shen’s paper takes two key departures from prior research when making predictions for China’s transportation sector. First, the scholars rely on historical data from China, rather than projecting future trends based on data from other countries. Second, Linn and Shen’s model incorporates data on vehicle ownership at the city level, rather than less granular data at the regional or national level, which allows them to account for local variation in transportation policy.
“These findings have important implications for China’s commitment under the Paris Agreement,” Linn says. “More cars than expected mean more emissions than expected, requiring more aggressive policies to meet its emissions targets.”
Compared to the results of the new study, other forecasts have underestimated emissions from China’s transportation sector by as much as 2 percent for 2017—a notable amount, given that the sector is responsible for about 9 percent of China’s total greenhouse gas emissions. If vehicle ownership in China continues to increase at its current rapid pace, the government will need to institute more ambitious policies to reduce vehicle emissions. And if transportation emissions prove difficult to control, the Chinese government may need to institute aggressive climate policies in other sectors.
For more information, read the working paper “The Effect of Income on Vehicle Demand: Evidence from China’s New Vehicle Market,” by Joshua Linn and Chang Shen.