Driving a car is a costly business. After the initial outlay to purchase the vehicle, there is the annual cost of insurance, the expense of general wear and tear, and the cost of the petrol or diesel needed to actually drive anywhere. These are all private costs of motoring, borne by the individual motorist. Individuals use these private costs to decide how much they wish to drive or, in economics jargon, the quantity of driving that they wish to consume.
However, these private costs are not the only costs associated with driving. Driving also has a number of negative externalities. Negative externalities are costs that arise from the production or consumption activities of an individual or firm, but are borne by a third party instead. In the case of motoring, these externalities are numerous. For example:
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