Is fare-free public transport effective in improving air quality? Evidence from Fuzhou, China

• We explore the effectiveness of Fuzhou’s fare-free public transport (FFPT) program. • We employ the difference-in-differences approach to identify causal effects. • The program reduces PM 2.5 levels by 0.332 µg/m 3 (2.1 %) in the short run. • The program increases daily subway ridership by 49.8%. • The program’s estimated health benefits largely outweigh the loss of fare revenue. Fare-free public transport (FFPT) programs are gaining increasing popularity worldwide as a policy tool to mitigate the negative externalities associated with automobile usage. However, evidence regarding their effectiveness in reducing air pollution, a major automobile externality, remains limited. In this study, we empirically examine the effect of FFPT programs on air quality in Fuzhou, a provincial capital city in China, based on a quasi-experimental design. Using difference-in-differences models, we find that Fuzhou’s FFPT program reduces fine particulate (PM 2.5 ) concentrations by 0.332 µg/m 3 (2.1 %) in the short run. Furthermore, the program leads to an increase of 129,486 rides (49.8%) in daily subway ridership. Back-of-the-envelope calculations indicate that the health benefits brought by the FFPT program through air quality improvements, including reduced mortality and healthcare expenditures, amount to about 3.09 billion Chinese yuan (or 478.92 million US dollars) annually, which is six times the loss of fare revenue. These findings highlight the potential of fare-free public transport as a sustainable urban transport policy in urban China and contribute to a better understanding of its cost-effectiveness.