Effects of cars
The externalities of automobiles, similarly to other economic externalities, are the measurable difference in costs for other parties to those of the car proprietor, such costs not taken into account when the proprietor opts to drive their car. According to Harvard University,[1] the main externalities of driving are local and global pollution, oil dependence, traffic congestion and traffic collisions; while according to a meta-study conducted by the Delft University[2] these externalities are congestion and scarcity costs, accident costs, air pollution costs, noise costs, climate change costs, costs for nature and landscape, costs for water pollution, costs for soil pollution and costs of energy dependency.[3]
Solutions to negative externalities[edit]
Pigovian taxes[edit]
Pigovian taxes are one solution used for correcting negative externalities caused by automobiles. By increasing the cost of using automobiles, it is possible to reduce consumption to an economically optimal level while raising tax revenue. This could be achieved through the use of fuel taxes and road taxes, which might be used for infrastructure investment and repair.[21] However meeting all negative externalities by fuel tax is politically difficult.[22] In the case of carbon taxes, revenue could be used for investment in environmentally friendly initiatives.[23] Fuel and carbon taxes have been criticized as being a regressive tax, that affect low income individuals greater than high earners. As a result, the Canadian government has used a portion of tax revenue from carbon taxes to rebate lower income households.[24]
Congestion pricing[edit]
Major cities such as London and Stockholm have introduced congestion pricing in order to reduce traffic and pollution in their city centres. This is implemented as a toll on automobiles entering the city centre during peak hours.[25] This toll aims to correct the negative externalities and change consumer behaviour, by making consumers more aware of the costs induced by their consumption. Congestion pricing is an efficient way at reducing traffic externalities, as monitoring technology allows prices to adapt to changes in traffic levels. This added toll reduces congestion, encourages the use of public transit, and raises revenue from tolls.[26]
Subsidizing alternatives[edit]
Many governments have begun subsidizing electric vehicles. With the intention of correcting the positive externality that electric vehicles contribute to the environment. This has been implemented through the use of tax credits, purchase rebates, and tax exemptions.[27] These subsidies reduce the cost of Zero-emissions vehicle and as a result increase demand. By incentivizing consumers to reduce their purchases of petrol vehicles in favour of electric cars, there is a decrease in negative externalities associated with emissions. There has been backlash against the equity of these subsidies, stating that these subsidies favour the wealthy.[28] It has been suggested that subsidizing ebikes and car charging stations would be fairer.[29][30]
Regulation[edit]
The use of emission standards on automobiles, reduces the amount of pollutants emitted by new automobiles thus reducing negative environmental externalities. This is an important piece in regulating automobile externalities, as emission levels per litre of gasoline consumed are not reduced by fuel taxes.[31] The European Union has set a target of 95g of CO2 per kilometre by 2021. Emission limits are based on mass of automobiles with heavier vehicles having higher limits. Manufacturers who miss this target are charged with increasing costs for each gram of additional pollution.[32] This policy serves to regulate pollution while accounting for unmeasured costs placed by automobiles on the environment.