Reuters: Volkswagen could face $18 billion penalties from EPA

Article published: Sep 18, 2015 – out of date: no longer suitable for your IB Economics commentary

IB Economics syllabus: Microeconomics (market failure, regulation, pollution)

While very unfortunate, the Volkswagen scandal serves as great material if you’d like to write a commentary on the negative externality of consumption. According to the article, VWs “clean diesel” vehicles “emit as much as 40 times the level of pollutants allowed under clean air rules.” Driving such cars heavily pollutes the air which is then inhaled by those – third parties – who did not buy those cars. This makes marginal social benefit fall far below marginal social cost…

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