Personal automotive travel is associated with many negative externalities, including air pollution, greenhouse gas (GHG) emissions and traffic congestion. The current cost of driving for motorists does not necessarily account for the costs associated with these externalities. Policymakers are employing a portfolio of policy instruments, including taxes, subsidies, mandates, restrictions, and transit investment, to transfer the costs of these externalities to motorists and the automotive industry.
- Recent research suggests that among the various externalities, congestion causes the maximum negative impact because of the economic cost of unproductive time. However, compared with other externalities such as global GHG emissions, congestion has received less attention from policymakers because of its local nature and relative lack of public support for anti-congestion measures.
- A vehicle miles traveled-based charge that varies according to vehicle characteristics, and the time and location of use, would be a way to transfer the costs of automotive travel-related externalities to motorists.
- Aggressive supply-side policies for fuel economy and vehicle electrification could discourage automakers from continuing to invest in research and development to improve the fuel economy of internal combustion engines.
- Reduced costs for new and replacement batteries, reduced electric vehicle manufacturing costs through economies of scale and reduction in electric vehicle (EV) depreciation rates will be critical if EVs are to achieve unsubsidized cost competitiveness with internal combustion engine vehicle counterparts.