The Hidden Costs of Vaping: Negative Externalities

 

Tamanna Suri

(Edited by Sevin Karabulut)

Despite UK regulations limiting the amount of nicotine in vapes, consumption of this persists due to smuggling from countries with looser laws. This blog will explore the negative externalities of vaping; it will discuss its impact on public health and NHS spending, thus government spending and the opportunity costs associated with this. Moreover, the blog will consider the UK’s rising national debt to discuss whether the negative externalities justify stricter governance of vaping. 

Before delving into the case study, it is important to understand what negative externalities are and their impact on society. Negative externalities refer to the costs on third parties due to the actions of producers and consumers. This blog will focus on the negative externalities of the consumption of vapes in the UK:

The graph above demonstrates the negative externalities of vaping consumption.  Here, the marginal private benefit (MPB) exceeds marginal social benefit (MSC), thus highlighting a cost to society. This indicates how consumers are myopic to the long-term health risks and costs of vaping as they only focus on the immediate gratification.  The market currently operates at the private optimum (), leading to overconsumption and misallocation of resources.  However, governments aim to shift the equilibrium from  to  to reduce welfare loss as shown in the shaded area, and reach social optimum. While there are some regulations in place in regard to nicotine strength, concerns over how effective they are have risen. This is because in the UK, vapes cannot contain more than 20 milligrams of nicotine per millilitre, however, in other countries such as the UAE, regulations are not as stringent, only capping nicotine per millilitre at 50 milligrams. In recent years, the smuggling of vapes exceeding the permitted percentage of nicotine has increased, coinciding with the percentage of children aged 11-18 who vape. In England alone, since 2021 there has been a 4% increase in the number of children who vape making the current percentage 8.6% (BBC News, 2023). While the long-term health issues of vaping are uncertain due to the addictive effects of nicotine, the short-term issues are arising; teens are experiencing anxiety, headaches and trouble concentrating requiring immediate medical care. The increased costs of healthcare may place a burden on the NHS. This represents a negative externality of consumption as the private benefits to consumers (MPB) outweigh the social benefits (MSB), leading to a welfare loss for society.

A key factor driving youth vaping is the marketing used by vape brands. This is shown through visually appealing packaging, variety of flavours, and even vapes with screens that function like smartphones. The increase in consumers, funding of these brands, and the innovation in vapes has resulted in raising concerns and as a result, the UK government have decided to intervene through more strict regulations. For example, as stated on GOV.UK, new legislation to ban the sale of single use vapes from 1 June 2025 has been laid in Parliament (UK Government, 2024).

Despite intervention, the effectiveness over this policy remains uncertain. While these new restrictions may reduce legal sales, they could also increase the already existing smuggled and black-market sales. Without measures to close loopholes the issue will persist, and it will be unclear to measure how long it will take for any economic or public health improvements to take place. This issue also demonstrates a significant opportunity cost. If the government invests heavily in enforcing this regulation to reduce negative externalities, the resources could have been allocated to more pressing issues such as NHS funding. Given the rising demand for healthcare services, policymakers must weigh the costs and benefits carefully to ensure that intervention in the vaping market is effective and does not result in further misallocation of resources.

References:

UK Government (2024) ‘Government crackdown on single-use vapes’, GOV.UK, [insert date]. Available at: https://www.gov.uk/government/news/government-crackdown-on-single-use-vapes#:~:text=New%20legislation%20to%20ban%20the,Minister%20Mary%20Creagh%20confirmed%20today. (Accessed 16 February)

BBC News (2023) ‘Underage vaping: UK government pledges action on “unacceptable” rise’, BBC, 30 January. Available at: https://www.bbc.co.uk/news/health-64597395 (Accessed 16 February)

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