Automobile Externalities

Writing about the costs imposed by driving, Tim Harford noted,

Real green taxes are not populist stunts. They are levied on activities that cause problems, and they reflect the size of those problems. Almost everyone recognises that whatever the benefits of driving around in a car, drivers also impose costs on each other and on the rest of us. Cars run people over, clog up the roads and spew pollution.

What is less widely recognised is that some of these antisocial costs are much bigger than others. Congestion and accidents, between them, generate almost all the costs of road transport. According to a report into "food miles" commissioned by the [British] Department for Environment, Food and Rural Affairs, people who drive cars to pick up shopping inflict a cost of more than Pounds 3.6bn [6.8 billion U.S. dollars] on society. Of this, 70 per cent is congestion and 26 per cent is attributable to accidents.

The article below notes the United Kingdom has Western Europe’s worst congestion and highest fuel taxes...

Just 1 per cent is because of the contribution of cars to climate change - and that is a figure using a fairly high estimate of Pounds 70 for the cost of a tonne of carbon. European businesses pay one-quarter of that for carbon emissions permits under the Kyoto-inspired emissions trading scheme.

Climate change is a big problem but cars are only part of that problem. Accidents and congestion are serious too: cars kill more than 3,000 people a year, while climate change will have to get very bad indeed before it affects the life of a typical British citizen as much as do traffic jams. Local air pollution is also a minor problem in comparison, and it is chiefly caused by older vehicles not the brand-new urban tanks that so outrage the less thoughtful kind of environmentalist.

So compare this with the US (apples to oranges, I know); according to Automobile Externalities and Policies (by Ian W. H. Parry, Margaret Walls and Winston Harrington):

• marginal air pollution costs from gasoline-powered vehicles costs us 2.2¢ per mile
• congestion now costs the United States an estimated $63 billion; one estimate of the cost is 5¢ per passenger vehicle mile
• the average social cost of traffic accidents 15.8¢ per vehicle mile (there are a little under or over 40,000 traffic fatalities per year in the US)
  

Finally, a couple of nuggets:

1. Higher fuel taxes improve efficiency because they also reduce mileage-related externalities. Higher fuel economy standards do not reduce mileage-related externalities; in fact they actually have the opposite effect by lowering fuel costs per mile. So much for the Corporate Average Fuel Economy (CAFE) program.
2. The solution proposed by the paper:
   

Electronic road pricing, which technological advances have now made feasible, offers the only real hope of reversing the tide of ever rising traffic congestion, and a transition to pay-as-you-drive insurance would provide a more effective and practical way to improve highway safety. Local pollution is less of a concern as it is steadily being solved through technological refinements to meet progressively more stringent new-vehicle emissions standards.

...it makes no economic sense to focus exclusively on regulating automobiles when the huge bulk of the low-cost sources for carbon abatement are in other sectors, particularly electricity generation. [Light-duty vehicles account for 20% of nationwide emissions of carbon dioxide, the leading greenhouse gas.] In our view federal policymakers should reduce emissions through a tax on the carbon content of all fossil fuels, not just gasoline, where the tax is moderately scaled at first, but rising steadily over time.