The less efficient engine itself is not because it is priced in. Because the government made them put it on the window of every single car sold.
A window sticker is not “pricing in” the externality.
A less efficient car engine means that the magnitude of the externality (in this case, the externalized cost, you can have externalized benefits as well) is larger.
The less efficient engine itself is not because it is priced in. Because the government made them put it on the window of every single car sold.