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Introduction

The financial crises have lead to several measures to help stimulating the economy and scrapping schemes have been introduced in several countries this spring and summer. For the car industry this measures is highly appreciated as the main aim of the scrapping schemes is to help the car industry from the effects of the financial crisis. However there are several side effects to take into account when discussing scrapping schemes and we would like to highlight these important effects in this report.

A premium to last owner is proved to be beneficial to keep a high collecting rate however a permanent premium (deposit) vs. a scrapping scheme does not have the same effects.

EGARA, European Group of Automotive Recycling Associations represents 14 national associations.

Summary

EGARA and its member associations strongly argue that scrapping scheme programs are neither in an environmental, either in an economical nor in a social aspect reasonable. The important effects to this argument are:

Economical Aspects:

A short term increase in sale will follow by a decrease in sale

Market for spare parts will decline

Inventory for spare parts will loose value

Environmental Aspects:

Violation to the principle that prevention of waste is the most environmental way of consuming

Emission must be analysed in a life cycle analysis (LCA)

The few years earlier these cars stop emission cannot compete with the emission and environmental stress of producing a new car.

Social Aspect:

Even with the premium many people that own older cars can’t afford buying new cars.

Economical Aspects

There is no doubt that the car industry is in great financial trouble at the moment and measures need to be taken to get the industry through the crises. But is scrapping schemes the right way to do this?

 

The scrapping schemes to stimulate the demand on cars are introduced in several countries. The last owner is given a premium on certain conditions; one of them being buying a new or sometimes a newer used car. In some countries the governments pay the price while in other the cost is shared between the government and the car dealers. Where the government pays the full price this is a gift to the struggling car industry. In any case the aim is to scrap older cars sooner than the normal life cycle. The short term effect is increased sale of cars but this short term increase will naturally be followed by a decrease in sale after end of program. So even for the car producers and dealers the scrapping schemes have a short time effect.

Influencing the market situation with artificial effects will disturb the naturally market forces and any short time positive effect will most likely have a negative effect within short time after the artificial effects stops.

In additional to this the sale of used spare parts will be greatly affected. Cars that are not ‘ripe’ for scrapping yet are good spare parts donors. If the scrapping schemes are ‘successful’, there will be no buyers for these spare parts so it can be questionable if any spare parts from these cars will be sold. Even existing stock can loose its value as customers are gone. By scrapping the cars before it’s naturally life cycle the used spare part marked and the repair shop business are greatly negatively influenced.

There are more people working in repairing and maintaining cars than producing new ones. Scrapping schemes have a very bad side effect because they harm many small and medium sized business spread all over Europe. On one side these programs push the production of new cars and protect jobs. On the other side it kills many jobs in many small companies doing the repair and maintenance work.

Is helping one important industry at the expense of another important industry the right solution?

Environmental Aspects

The priorities in the prevention of waste are:

  • prevention of waste
  • reuse
  • recycle
  • recovery

This is also adopted in the ELV directive (directive 2005/53/EC in end-of life vehicles), article 1.

The scrapping schemes intervene in the naturally end-of life cycle and violate the principle that prevention of waste is the most environmental form of consuming. Percentage of emission decrease is minimal and costs are high. Only to forward the natural decrease because cars would be discarded and replaced within a few years anyway. The few years earlier these cars stop emission cannot compete with the emission and environmental stress of producing a new car. It must not be forgotten the emission in a life cycle analysis (LCA).

The environmental cost of new parts manufacturing are far higher than the use of green parts which is reuse. It seems to be forgotten that re-use is the best way to recycle.

In some countries capacity problems will arise. Capacity problems can have environmental effects; see both examples from Germany and Norway.

 

Social Aspects

The introduced scrapping schemes depend on buying a new or a newer car. To get e.g. €2500,-  in premium to buy a new car is quite a gap to bridge. Many people who own an old car that meet the parameters to get the premium can’t afford to buy a new car. When not affording a new car buying a used newer car can be an option in some of the countries. However the intervention in market forces can cause increased price on newer used cars due to higher demand, especially where the cost on the scrapping schemes is paid by the government.

The side effect on the repair and maintenance business will also be a side effect to the private consumers who still own an older car. The combination between repairing and maintaining cars, preferably with ‘recycling-parts’ is economical as well as ecological sensible. Not only to drive with a used car is very often the only possibility for some people, also the servicing of these cars must be favourable. Scrapping schemes destroy both industries.

 

Examples

 

Ireland 1995

The scrapping scheme in Ireland was introduced with an environmental aim to remove old polluting cars and replacing them with new cars. However the owners of the oldest and most polluted cars could not afford buying a new car. Some people handed in their second car in the family that was a small car, and bought a new bigger main car, which meant they now had two cars with bigger engines.

Norway 1996

The aim was to renew the car park by introducing a premium for older cars for one year. The number of cars which were scrapped that year increased more than 300% as a result of the extra premium. The cost was taken by the government. The decrease in average age on cars was 0, 4 year due to the introduced program. However after less than three years this average age was back to ‘normal’ again. The campaign had in less that three year no long term effect in the average age, the main goal on the scrapping scheme. In addition to that, the car dismantlers had an enormous struggle to cope with the great increase in number of scrapped cars. To be able to handle the amount of cars full focus was on correct depolluting. No time, no storage and no resourced where left on reuse of the spare parts. This was a great negative effect on the scrapping scheme. The next two years a limited amount of cars where scrapped due to the intervening in the natural life cycle the campaign causes. An independent evaluation after the end of the program concluded that the social economical effect for the program was unprofitable.

Denmark 1994-1995

The sale of used spare parts was greatly affected. By scrapping the cars before it’s naturally life cycle a large number of spare parts in store had to be discarded. The car dismantling business was very negatively affected.

Germany 2009

A large amount of cars are scrapped due to the scrapping schemes. However it seems that the dismantling capacity does not handle the amount as a great number of unidentified numbers of scrapped but not depolluted cars observed transported from Germany to the Netherlands and other countries in and outside of Europe and dumped there. This means in most cases illegal cross-boarder transport of hazardous waste.

USA 2009

At first glance the scrapping scheme program in USA, Cash for Clunkers, seems to be an immediate success; but a success for whom? The heavily struggling car industry in USA does have a short time positive affect from the program. But again, the scrapping scheme limits any sale of used part from the scrapped cars so the car dismantling industry is heavily negatively affected. When a car gets to a dealer as a part of the program the dealer puts a special substance in the gear box and engine to make sure this will not be reused. Again it is stated; is helping one important industry at the expense of another important industry the right the solution?

Conclusion

EGARA and its member associations strongly argue that scrapping scheme programs are neither in an environmental, either in an economical nor in a social aspect reasonable.

An independent evaluation from Norway concluded that the social economical effect for the scrapping scheme program was unprofitable.