Exam 5: Externalities, Environmental Policy, and Public Goods

According to Violeta Bulc, the Transport Commissioner of the European Union (EU), the EU should move to a "polluter pays" model by charging motorists for the damage they cause to the environment and for lives lost on the road. A European Commission study has found that external costs of all transport in the EU is estimated at 1,000 billion euros annually, with road transport responsible for more than three-quarters of the total. This figure covers the costs caused by crashes, air pollution, noise pollution, habitat damage, and traffic congestion. , with the cost of congestion alone at more than 250 billion euros. According to Bulc, "These costs are real even if they are not priced by the markets. And the question is: if the user and polluter are not paying, who does? Well, we all do, all of society, regardless of whether we want to or not. That means that, for the time being, we have a 'society and environment pays' principle in place rather than 'user pays' or 'polluter pays.'" Source: Carlton Reid, "Motorists Should Pay Full Costs Of Road Pollution, Deaths and Damage, Says EU Transport Commissioner," Forbes, January 24, 2019. -Refer to the Article Summary. According to the article summary, motorists in the EU are not paying the full costs of the damage they cause to the environment, and those costs are being passed on to society as a whole. This is an example of a ________ due to the environmental damage being caused by motorists.

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