Do Drinkers Pay Their Way in the European Union?

Fifty-eight million people — approximately the population of the UK — 'drink too much' in the European Union. Heavy drinking may lead to violent behavior, causes accidents and impairs health. The external costs of harmful alcohol use exceed alcohol excise duty collections by a wide margin. In considering an increase in alcohol duty, however, the welfare gains from a reduction in socially costly heavy drinking must be balanced against the welfare loss from a fall in moderate drinking. This suggests that complementary regulatory measures, which focus on specific problem groups, should be an important element of the policy package.