When thinking of polluted cities the list generally includes: Mumbai, Beijing, and other large cities. But joining that list is Kathmandu, Nepal. In 2016, Yale University's EPI rated air pollution in the country as the fourth-worst in the world. A large part of this is due to the increase in automobile sales within the last several years. Just in the 2015-16 fiscal year there was a 109% increase in registered vehicles. Along with that, banks were, until this past year, offering auto loans for just 10% down. This helped many people get into the car market which they otherwise would have been priced out of.
This increase in cars has created a negative consumption externality, where the private marginal benefit is greater than the marginal social benefit. By people buying cars that contribute to increased pollution and decreased air quality, there is a negative effect to others in society that cannot be compensated for. While the government has tried to deter people from owning cars for more than a decade with a corrective tax that now stands at 300% on car sales, the low downpayment percentage along with around 6% interest rate does not help the tax restrict quantity to the allocative efficient output.
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