Externalities of automobiles

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The externalities of automobiles, as similarly other economic externalities, are the measurable costs for other parties except the car proprietor, such costs not being taken into account when the proprietor opts to drive their car. According to the Harvard University,[1] the main externalities of driving are local and global pollution, oil dependence, traffic congestion and traffic accidents; 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.

Negative externalities[edit]

The negative externalities seem to be the most obvious to confirm, since the driver does not take into account, for example, the negative effects of air pollution on third parties, when they opt to drive their car. The legislators and the regulators shall, therefore, internalize those external costs, either by taxes on fuels for example, either by any kind of limitation to car usage, such as parking meters or urban tolls. Nevertheless, it seems the drivers in some countries, already pay some external costs with taxes. Road taxes in the Netherlands for instance, have a relatively high yearly value, which covers the maintenance of the infrastructures. Nevertheless, in the majority of western nations, the external costs of driving, are not covered totally either by taxes, or by any kind of car usage limitation.[2]

Traffic congestion and scarcity[edit]

Increased reliance on the automobile leads to increased road congestion. While expansions in road capacity are often touted as relieving congestion, induced demand often means that any reductions in congestion are temporary.


Cars are the leading cause of fatal traffic accidents in many countries, cars are the leading cause of death of youth and children. In addition to that, health care costs are largely borne by society and injuries to healthy productive citizens caused by car accidents have a cost of millions of disability adjusted life years every year. Vision zero is one approach to reduce road fatalities.

Air pollution[edit]

Cars produce numerous harmful air pollutants in their exhaust such as Nitrogen oxides, particulate matter, low atmospheric ozone (indirectly) and in the case of leaded fuel, lead. Those pollutants are known to cause various respiratory and other health issues and cars are among the leading cause of smog in modern developed world cities.


Cars significantly contribute to noise pollution. While on common perception the engine is the main cause for noise, at city speeds the noise produced by wheel and asphalt is commonly the dominant factor while at highway speeds air friction noises become a major factor.

Climate change[edit]

Climate change is significantly caused by human activity, particularly the production of greenhouse gasses and their release into the atmosphere. Cars produce more Carbon dioxide per passenger kilometer than any other form of land transport. In addition to that Nitrogen oxides are also greenhouse gasses.

Costs for nature and landscape[edit]

Roads, parking spaces but also suburban sprawl caused by cars need significant amount of space. Typically, once agricultural or uncultivated land is turned over into ever wider motorways and ever larger parking lots to accommodate the automobile but induced demand means any relief is temporary and more and more surfaces are sealed in the process.

Costs for water pollution[edit]

Lubricants and fuels used by automobiles are harmful when they leak into the groundwater. Oil refineries and particularly the mining of unconventional oil like oil shales and oil sands can be extremely harmful for the surrounding water resources and bodies of water.

In addition to that runoff of impervious surfaces like roads or parking lots can be contaminated with all sorts of pollutants.

Costs for soil pollution[edit]

In addition to the fertile topsoil often "buried" under freeways and parking spaces, cars directly or indirectly release pollutants into the soil. Oil may leak into the groundwater and the common practice to clean cars in the front yard causes surfactants and other products in the cleaning products to pollute the ground. Similarly, salt is often used to keep roads and highways free of snow and ice and chlorides cause major damage to vegetation as well as being an aggressive substance linked to rust and corrosion.

Costs of energy dependency[edit]

While trains and tramway often run on electricity which can be generated through renewable sources or locally available fuel, cars by and large run on petroleum derived fuels. Only a handful of countries are net exporters of petroleum. For developed countries this causes a political dependence on a reliable petroleum supply and has been cited as the reason for foreign policy decisions of the United States among others. For developing countries, petroleum products can be among the chief imports and reliance on automobiles can significantly impact the trade deficit and public debt of such nations.


Some research indicates a correlation between urban sprawl and obesity. Car centric development and lack of walkability lead to less use of active modes of transportation such as utility cycling and walking which is linked to various health issues caused by a lack of exercise.

Positive externalities[edit]

While the existence of negative externalities seem consensual, the existence of positive externalities of the automobile does not have consensus amongst economists and experts in the transportation sector. The creation of jobs or the fact that the related industries pay taxes, cannot be considered, as such, as positive externalities, because any legal economic activity pays taxes, and the big majority also needs job demand. Time saving to the driver, and therefore eventually more personal production, cannot either be considered a positive externality, because the driver has already taken those factors into account when they opted to use their car, and therefore these factors cannot be considered, by many authors, a pure externality.

Accessibility and Land Value[edit]

Notwithstanding the above objections, some authors enumerate positive externalities for the automobile like accessibility and land value. Where land is expensive, it is developed more intensively. Where it is more intensively developed, there are more activities and destinations that can be reached in a given time. Where there are more activities, accessibility is higher and where accessibility is higher, land is more expensive.[3]

However observations show that less car dependent forms of development produce denser settlement patterns and higher land values.

City Growth[edit]

Economists have sought to understand why cities grow and why large cities seem to be at an advantage relative to others. One explanation that has received much attention emphasizes the role of agglomeration economies in facilitating and sustaining city growth. The clustering of firms and workers in cities generates positive externalities by allowing for labor market pooling, input sharing, and knowledge spillovers.[3]

Nevertheless some other economists mention urban decay and urban sprawl as a negative effect or cost of the automobile, when the city grows due to automobile dependency.[4]

See also[edit]


  1. ^ IAN W. H. PARRY; et al. (June 2007). "Automobile Externalities and Policies" (PDF). Journal of Economic Literature: 30. Retrieved 2015-09-20.
  2. ^ a b M. Maibach; et al. (February 2008). "Handbook on estimation of external costs in the transport sector" (PDF). Delft, February: 332. Retrieved 2015-09-20.
  3. ^ a b "Transportation Economics".
  4. ^ Newman, Peter W.G.; Kenworthy, Jeffrey R. (1989). Cities and automobile dependence : a sourcebook. Aldershot, Hants., England: Gower Technical. ISBN 9780566070402.