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Traffic jams and excessive car use continue to increase in Germany. They are caused not least by the fact that motorists do not have to bear the external costs of driving. These costs include environmental damage, congestion, noise, and higher risks of accidents. To internalize such costs, economists advocating putting a price on the source of the externality. For example, road congestion can be solved by dynamically pricing scarce road capacities in the form of an urban toll, which RWI has been promoting for years as an answer to traffic problems in cities. Similarly, carbon taxes serve to mitigate the costs of climate change by disincentivizing car use.
