Diesel technology and the harm that its use causes in the form of local and global pollutant emissions have long been in the focus of environmental policy debates. Even the option of imposing driving bans on diesel cars is now a distinct possibility. Thus far, however, what this diesel debate has unfortunately largely neglected is the economic perspective. The question at the heart of the diesel debate is what is the best way of fulfilling and reconciling the disparate desires for mobility, good health and an intact environment going forward? Economists’ key demand here is that policymakers should address the issue of negative externalities and set a technology-neutral price on the associated activities. This would ensure – from an economic perspective – that social objectives are achieved at the lowest possible cost for consumers and industry alike. This ZEW policy brief considers various negative externalities arising from the use of internalcombustion engines and proposes economic policy instruments as part of a long-term strategy to mitigate these effects.

Achtnicht, Martin, Martin Kesternich and Bodo Sturm (2018), The ‘Diesel’ Debate: Economic Policy Recommendations, ZEW policy brief No. 18-03, Mannheim. Download