The Volkswagen case : what shall we learn?

Abstract

This introductory article considers the recent Volkswagen case, presenting it from an economic perspective. The authors note that transportation as a sector has always provided interesting cases for the study of market failures, particularly those connected to external costs. The article discusses the higher costs borne by companies to limit polluting emissions, hiding real emissions values, the motivation behind the cheating, sustainability and its real economic costs, the role of consumer’s trust in a specific company and in a sector as a whole, how much consumers will pay for true sustainability, educational approaches to remedy the lack of understanding of environmental problems, and the role of government and regulatory bodies in addresses these issues. The authors recommend that governments establish goals and undertake efforts toward environmental sustainability that can internalize external costs, such as local congestion traffic schemes, road tolls based on distance, etc., and that can be promoted as a comprehensive approach to sustainable transportation.