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August 18, 2008
Series Editor: Ian Parry
Managing Editor: Felicia Day
Assistant Editors: John Anderson and Adrienne Foerster

Welcome to the RFF Weekly Policy Commentary, which is meant to provide an easy way to learn about important policy issues related to environmental, natural resource, energy, urban, and public health problems.

The potential for environmental policies to improve human welfare is often much greater in developing nations, where large urban populations are frequently exposed to especially polluted air and water. Hence the value of sound economic analysis that sorts out which environmental policies work for developing countries and which do not. This week’s commentary by Lucas Davis discusses one environmentally-motivated policy—regulations that restrict the number of days people can drive their vehicles—that does not seem to be working well, at least for Mexico City.

In the next commentary, Scott Grosse will discuss the relationship between IQ and income, and the benefits of reducing exposure to lead.


Driving Restrictions and Air Quality in Mexico City

Lucas W. Davis

Whereas U.S. cities have seen dramatic improvements in air quality over the last three decades, Mexico City has been considerably less successful. Levels of major air pollutants in Mexico City routinely exceed the maximum exposure limits established by the World Health Organization (WHO). For example, the WHO has warned that eight-hour average ozone levels exceeding 100 micrograms per cubic meter threaten human health, causing respiratory infections, chronic respiratory illness and aggravation of existing cardiovascular disease. Evidence from monitoring stations in Mexico City indicates that during the period 1986–2005, this guideline was exceeded 92 percent of the time. Extrapolations from U.S. studies suggest that these pollution levels lead to thousands of premature deaths a year in Mexico City.

Nearly 20 years ago, record levels of ozone and other airborne pollutants led the Mexico City government to introduce a program, Hoy No Circula, which bans most drivers from using their vehicles one weekday per week, based on the last digit of the vehicle's license plate. (For example, vehicles with a license plate ending in 5 or 6 may not be used on Monday.) The restrictions are in place between 5 a.m. and 10 p.m. and affect the vast majority of residential and commercial vehicles, although taxis are excluded. When imposed in 1989, the restrictions applied to 2.3 million vehicles, or 460,000 vehicles per day.

The policy seemed reasonable at the start. After all, vehicle emissions are overwhelmingly the primary source of air pollution in Mexico City. According to a recent emissions inventory, vehicles are responsible for 81 percent of the nitrogen oxides and 46 percent of the volatile organic compounds in the Mexico City atmosphere. However, when hourly air pollution records from monitoring stations were examined, they showed no evidence that the program has improved air quality. While weekend and late night air pollution increased relative to weekdays, consistent with drivers shifting to hours when the program is not in effect, weekday pollution levels did not change at all.

The primary cause of the program’s failure turns out to be human adaptation. While the hope was that drivers would shift to low-emissions forms of transportation, such as the subway or the public or private bus systems, no one got out of their cars. Instead, the evidence indicates that HNC has led to an increase in the total number of vehicles in circulation. What is the easiest way to circumvent the Hoy No Circula program? Buy a second car. A driver with two vehicles can drive every day of the week as long as the last digits of the license plates don’t match. Plus, the data shows that most of the new cars are, in fact, used and imported from other parts of the country, and thus tend to be high-emitting.

An additional explanation is the increased use of taxis. There are over 100,000 taxis in Mexico City, or approximately one taxi for every 100 residents. In comparison, New York City has approximately one taxi for every 600 residents and Beijing has one taxi for every 175 residents. Mexico City’s unusually large stock of taxis was well positioned to absorb any increase in demand from HNC. Moreover, from 1986–2005, taxis in Mexico City were among the highest-emitting vehicles in circulation; most were Volkswagen Beetles, a vehicle that has not been sold in the United States since 1977.





Lucas W. Davis is an assistant professor of economics at the University of Michigan and a faculty research fellow at the National Bureau of Economic Research. Central to his research and teaching interest are public finance, applied microeconomics, and energy and environmental economics

But, given HNC’s basic failure to alter driver behavior, Mexico City’s highly congested streets are as clogged as ever. Yet the inconvenience of the driving restrictions still imposes costs on vehicle owners; a rough calculation suggest these costs amount to over $300 million per year, or $130 per vehicle owner.

Questions about the effectiveness of this program are relevant to current  environmental policy in Mexico City. Air quality remains a severe problem in Mexico City with ozone levels exceeding WHO standards 79 percent of the time in 2005.  Despite the contrary evidence, HNC was actually expanded July 2008 to include Saturday driving restrictions. Some see HNC as the central component of Mexico City's strategy for addressing air pollution while others would like to replace it with other forms of pollution control. Either way, reliable estimates of the effect of  HNC on air pollution are necessary for evaluating these alternatives.

Carrying out such analysis would have implications for air quality and transportation policies throughout the urban developing world. According to the World Bank, the 10 cities with the highest average levels of airborne particulates are all in the developing world. Trends in population and vehicle growth in these urban areas threaten to exacerbate these problems. Between 2000 and 2030, the number of people living in cities in less developed countries is forecast to increase by 1.96 billion. This represents 97 percent of the projected global population increase during this period.

Driving restrictions are one of the tools available to policymakers as they confront this growing problem. Indeed, since HNC was implemented similar programs have been implemented such as pico y placa in Bogota, restricción vehicular in Santiago, rodízio in São Paolo, and, most recently, restrictions in Beijing in preparation for the 2008 Olympics. In total, over 50 million people live in cities with driving restrictions based on license plates.

Evidence, at least from Mexico City’s experience, suggests that these policies to restrict driving are misguided. More effective environmental policies are probably those that have worked best in the United States, namely progressively tighter emissions standards for mobile and stationary sources, as well as better enforcement through, for example, stricter requirements for regular vehicle emissions inspections.


Views expressed are those of the author. RFF does not take institutional positions on legislative or policy questions.

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Additional Resources:

Davis, Lucas W. 2008. “The Effect of Driving Restrictions on Air Quality in Mexico City,” Journal of Political Economy, 116(1), 38-81.

Molina, Luisa T. and Mario J. Molina (eds.). 2004. Air Quality in the Mexico Megacity: An Integrated Assessment. Dordrecht: Kluwer Academic Publishers.

Parry, Ian W. H. and Govinda R. Timilsina. 2008. “How Should Passenger Travel in Mexico City Be Priced? RFF Discussion Paper RFF-DP 08-17.

World Bank Mexico Air Quality Management Team. 2002. ``Improving Air Quality in Metropolitan Mexico City: An Economic Valuation.'' Policy Research Working Paper, WPS 2785, World Bank, Washington, D.C.

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