Explain how international travel may create external costs.
Answers
Answer:
Personal and goods transport entail a significant societal and economic cost in the form of environmental and human health impacts, accidents, congestion, as well as infrastructure wear and tear. These costs are, however, largely unaccounted for in the price that transport users pay today. In the absence of a dedicated fiscal and policy framework, transport users thus currently do not consider external costs as part of their travel decisions.
Back in 2011 the European Commission acknowledged in its White Paper the importance of implementing ‘fair and efficient transport pricing’. Consequently, a number of ongoing legislative processes, most notably the revision of the Eurovignette Directive on road pricing, aim to enact the long standing ‘user pays’ and ‘polluter pays’ principles. Yet, while there is agreement over the general principles, the specific policy design is still to be determined. The French government’s recent backing down on a tax proposal that would have seen fuel prices increase by just under 3% shows how difficult it is to impose any economic pain in the name of tackling climate change. This calls for careful design and implementation of fiscal policy measures in order to ensure public acceptance, equity and social inclusion.