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ITF study finds limited environmental and safety impacts of car fleet renewal schemes in US, France and Germany

Itf
Cost-effectiveness of the fleet renewal schemes analysed from the perspective of CO2 and NOx reduction and increased safety. Click to enlarge.

Car fleet renewal schemes introduced in the US, France and Germany to stimulate consumer spending on cars in the wake of the 2008 economic crisis fell short of their potential to deliver on environmental and safety objectives, according to a new report prepared by Dutch research and consultancy organization TNO and published by the International Transport Forum.

The study assessed the three qualitatively different schemes—the French Prime à la Casse, the German Umweltprämie and the US Cars program—for the impact on CO2 and NOx emissions of 2.8 million transactions in which old cars were traded for new vehicles under these car fleet renewal schemes.

The report assesses the value for money of the different schemes and identifies critical design elements for ensuring success in meeting the environmental and safety objectives. The report does not address the employment or stimulus-related impacts of fleet renewal schemes which are arguably their primary objectives.

The report concludes that it is vital to consider the objectives of the schemes very carefully when setting their design parameters (conditions and incentives on the traded and new vehicles) in order to guarantee success. While scrappage schemes have the potential to deliver on objectives such as reducing pollutant emissions, these have not done so as well as they could, precisely because of their design characteristics.

Further, the study suggests that seeking CO2 reduction ahead of pollution or safety improvements in the design of the schemes leads to decreased cost-effectiveness and lower overall societal benefit.

Key findings of the study included:

  • Insights on scheme design. For the monetized benefits in terms of CO2, NOx or safety to exceed the costs associated with vehicle replacement, scheme design should ensure that larger and older “dirty” vehicles are traded in for lighter, cleaner ones. If anything else is allowed by the scheme, then CO2, NOx and safety benefits are eroded.

    The schemes should ideally target older vehicles that are still being driven. In Europe, for example, this means covering pre-1992 cars that predate Euro standards and Euro-1 cars produced from 1992 to 1996. The US scheme saw positive results from targeted incentives based on fuel economy, even if these were imperfectly aligned with fuel consumption or pollutant emissions. The German scheme involved a larger number of vehicles, but the class shift actually reduced the total impacts (on average more lighter and smaller vehicles were traded in for medium-sized vehicles than vice versa). The French scheme benefited from imposing a type-approval CO2 limit for new cars and retiring very old gross-emitters, but that may have led to a very high share of new diesel vehicles, which strongly limits lifetime NOx benefits.

    Increased awareness of the monetized societal benefits of avoided NOx, in addition to CO2, might have helped to improve the overall cost effectiveness of the scheme. For example, the analysis in the report suggests that there may have been a case for differentiated incentives for gasoline and diesel vehicles due to the monetized NOx impacts of diesels.

  • Cost-effectiveness. From a societal perspective, the US scheme cost nearly €1 billion (US$1.4 billion) in destroyed assets (scrapped vehicles). The largest monetized benefit comes from avoided NOx emissions (~€500 million), followed by avoided casualties (~€150 million), leading to a total quantified recovery of approximately 80% of the societal cost. Given that other possible benefits of the scheme were not quantified or given, and accounting for the uncertainty associated with some of the numbers (e.g. the average value of the scrapped cars), the US scheme may have had benefits in line with its costs.

    On a per-vehicle basis, the German scheme achieved lower CO2, NOx and safety impacts throughout. As a result, it was less cost-effective in delivering beneficial CO2, NOx and safety outcomes with the benefits quantified here representing only around 25% of the estimated costs.

    In France the scheme succeeded in targeting the right vehicles for scrapping and resulted in an estimated recovery of around 45%, but a much higher societal value could have been reached through a more ambitious NOx reduction (which is the effect with the largest potential for delivering societal benefit).

  • Impacts on CO2. The 3 schemes reduced CO2 emissions, not only in 2010, but also cumulatively to 2030 (~100, ~200 and ~265 thousand tonnes cumulatively from 2010 to 2025 for the US, Germany and France respectively). However, the monetized value of that impact seems quite small (<€5 million in the US, <€10 million in Germany and France) and the overall results suggest CO2 abatement should not be the main rationale for putting a fleet renewal scheme in place.

    The contributions towards CO2 reduction vary with the class and age of the scrapped vehicles, but unfortunately the analysis does not clarify which age of vehicles to target—replacing younger vehicles delivers more CO2 reductions, but at higher societal economic cost.

  • Impacts on NOx. The monetized NOx impact seems to be 1-2 orders of magnitude higher than the CO2 impact (~€500 million in the US, ~€300 million in Germany, ~€100 million in France), and it does suggest which vehicles such a scheme ought to target: in general, vehicles older than ~15 years. The French scheme shows that a large share of diesels among replacement vehicles erodes the NOx impact, and should thus be accounted for.

  • Impacts on traffic safety. In the long run, the US scheme is estimated to avoid ~2,800 serious injuries, of which ~40 are fatalities. Electronic Stability Control and the effect of general improvements in vehicle safety account for 70% of the impact. In Germany, it is estimated that ~6,100 injuries and ~60 fatalities will be avoided. Also here, the conclusion seems to be that “older cars should be retired”. The French scheme is estimated to have had a much more limited impact: only ~330 serious injuries avoided, of which ~20 are fatalities.

The report was prepared by the Dutch research and consultancy organization TNO together with experts at the International Transport Forum and the OECD Environment Directorate. The safety impact analysis was prepared by the Dutch Institute for Road Safety Research (SWOV). The project was initiated by the International Transport Forum, a transport policy think tank linked to the OECD, the OECD Environment Directorate and the FIA Foundation under the aegis of the Global Fuel Economy Initiative (GFEI). (Earlier post.)

GFEI works with countries to develop an appropriate national approach and supporting target for improved car fleet fuel economy, while working toward a global reduction of emissions from the road transport sector by 2050.

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Comments

HarveyD

There is no such thing as the perfect scheme or program. It is almost impossible to maximize all factors with the same program.

Engineer-Poet

A study confirming what the armchair analyst pretty much agreed with at the time.

Scott

There doesn't seem to be anything here which assesses the embedded energy costs of scrapping and replacing vehicles.

A lot of energy is consumed in car manufacturing and in turn this equates potentially greater to emissions from the factory. Preamaturely replacing older cars which have the potential to run for many more miles may be more harmful in energy and emission terms than keeping them for the remainder of their running life. As well as being potentially harmful in these terms, it also puts a strain on public resources and it is a subsidy which seems to target more wealthy people who can afford a new car anyway. So in this sense its money down the drain - a complete nonesense in these days where public finances are in a mess - the US is near the point of defaulting on its debt, yet has thrown money at people to scrap cars that have a good few years left in them.

Put simply scrappage schemes are a waste of money and resources.

Engineer-Poet

It was an effort to move the auto industry's inventory, a back-door bailout.

HarveyD

Too big to fail...various bail-outs had to be used. Is it borrowed time for our inefficient car industry? Will somebody identify the major reasons, including higher labor cost, lower quality and lower productivity?

Erblodgett

Not a back-door bailout but a front-door stimulus targeting a consumer area other than "made in China".

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