Last Updated 17 Aug 2022

Positive and Negative Externalities on the Automotive Industry

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Most industries are affected by both positive and negative externalities and automobile industry has not been an exception, the two most notable positive externalities that affect automotives are lower prices and employment. In his speech Leary (n. d) identifies low costs as the most obvious positive externalities in the automotive industry and the whole economy at large and vehicle transport eases and reduces the cost of distributing products and for customers to look for and purchase them.

The industry also provides a source of livelihood for many unemployed people by creating job opportunities. The department of commerce (n. d. ) in the United States, employment in the automotive sector rose by over 7% between 1991 and 2005. There are several negative externalities in the automotive industry in the world and more so in the United States and they include, depletion of natural resources like oil and land, environmental pollution especially air pollution and heavy metal toxicities like lead contamination.

Studies by Environmed Research Inc (1995) indicate that there has been an extensive air pollution problem caused by the increased productivity in the automotive industry especially in the US since it is the largest consumer of oil and consequently largest carbon gas emitter. The air Pollution comes with a lot of health hazards like posing the risk to respiratory diseases, thus the economy is affected by the increased medical expenses and to a larger extent it is the major contributor to the greenhouse effects (global warming) hence people cannot settle in some areas because of the elevated temperatures.

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The use of lead in automotive industry especially the lead starter batteries cause a lot of lead contamination of the water, air and soil (environmental defense 2003). The inappropriate means of recycling the material causes the lead pollution and the resulting health risk to human beings. In this way, the economy is adversely affected in terms of medical costs, poor plant yields and destruction of the aquatic life. Depletion of the non recyclable natural resources especially crude oil is a major concern to the ongoing advancement in automotive industry and also a negative externality of the automotive industry.

The Department of Transportation (2002) in the US recorded a notable increase in the consumption of fuel particularly diesel and gasoline between 1992 and 2002. Congestion on the roads is one of the significant negative externalities of the auto industry caused by the increased production and purchasing of automotives products consequently leading to increased traffic on the roads. The increased traffic causes the accidents rates on the roads to increase, however governments are carrying out a lot of changes to curb road accidents by reducing congestion. The US uses vehicle tolls and High Occupancy Vehicles lanes.

Positive and Negative Externalities on the Automotive Industry essay

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