Strategic Management Auto Industry – AssignmentHelpExperts Government Policies Related to Externalities

At present, there are several externalities that have positive as well as negative impacts on auto industry in terms of costs and benefits. Oil dependence, traffic congestion or jamming, traffic accidents, local and global air pollution, global climate change and road maintenance are some of the examples of externalities that are associated with auto industry (Wit & Blignaut, 2004). These externalities create different issues for automobile companies due to negative impact on business. The federal government developed different policies and regulations to address issues related to these externalities. Some of the current and expected government policies and regulations are as discussed below –

Environmental Taxation Policy: Currently, the government of different countries charging fuel taxes on fuel consumption under the environmental tax policies in order to improve fuel efficiency. The fuel taxes are higher in European Union (EU) as compared to the United States that is a big issue for auto industry of European counties. It is because; this taxation policy is affecting sales volume of automobile firms due to increase in fuel prices, cost of vehicles and environmental restrictions (OECD, 2010).

Emissions Standards and Related Policies: The federal government also developed policies and regulations to define emission standards in order to protect global climate and reduce level of air pollution. In this context, Clean Air Act (ACC) is one of the main laws that are designed by the US Federal to control air pollution on national level. The provisions and standards of this act force auto industry to reduce emission of carbon and other gases as well as increase use of green technology (Parry, Walls & Harrington, 2006). In year 2009, the current U.S. federal government announced tough regulations for automobile emissions and mileage standards to improve fuel efficiency and protect environment. But at the same time, new changes in emission standards will affect profits of auto companies due to requirements of additional investment to improve production technology and use green technology (Broder, 2009).

Corporate Average Fuel Economy (CAFE) Program: The CAFE act was established by the federal government to force automobile manufactures to meet standards of fuel mileage in their vehicles. Under this act, government set standards for different types of vehicles including light truck and cars to improve fuel efficiency and reduce carbon emission. In last few years, the fuel economy standards are increased to 22.2 miles per gallon for light trucks and 27.5 miles per gallon for cars. These changes in standards forced automobile companies to upgrade their production technology and increase investment in research & development (R&D) activities that increased costs (Parry, Walls & Harrington, 2006). At the same time, the expected regulations regarding fuel efficiency under this act will influence profits of auto industry due to rise in costs. Along with this auto industry case study help, there are some other emerging government policies related to charging for accident risk, use of green technology, increase production of hybrid vehicles, and reduce emission of gases from current level etc. that are planned to introduce in order to address issues of externalities effectively. References Broder, J.M. (2009). Obama to Toughen Rules on Emissions and Mileage. Retrieved fromhttp://www.nytimes.com/2009/05/19/business/19emissions.html?pagewanted=all&_r=0 OECD. (2010). Globalisation, Transport and the Environment. USA: OECD Publishing. Parry, I.W.H., Walls, M & Harrington, W. (2006). Automobile Externalities and Policies. Retrieved from http://www.rff.org/rff/documents/rff-dp-06-26-rev.pdf Wit, M.P.D & Blignaut, J. (2004). Sustainable Options: Development Lessons from Applied Environmental Economics. South Aficra: Juta and Company Ltd.