Optimal restrictions on vehicle use for urban sustainability for Mexico City

This paper describes and develops the conditions that make the demand side policy of vehicle use restrictions part of a cost-effective set of environmental control policies. Mexico City's experience with vehicle use restrictions is described and its failure analysed. It is argued that Mexico City took a step in the right direction, but failed to make the restrictions flexible, thereby making the policy perverse. A programme of tradable vehicle use permits is presented and described that would provide the needed flexibility and promote urban sustainability.