Accelerated vehicle replacement schemes have been implemented in many countries around the world in recent years, often as part of a package of measures to stimulate economic recovery. These schemes are meant to have a number of different effects and can include:

‌‌‌‌	support for the automobile industry (including the dealers and other related businesses); improving air quality; reducing dependence on imported oil; reducing CO2 emissions; improving road safety.

The OECD, the International Transport Forum and the Fédération International de l'Automobile (FIA Foundation), under the aegis of the Global Fuel Economy Initiative, addressed the issue of car scrapping schemes and evaluated their safety impacts together with the impacts of selected car fleet renewal schemes on CO₂ emissions, traffic safety and NO_x emission impacts and undertook a qualitative assessment of impacts on emissions of particulate matter. The study did not look at employment or stimulus-related impacts.

The report "Car Fleet Renewal Schemes: Environmental and Safety Impacts" assesses three qualitatively different fleet renewal schemes: the French Prime à la Casse, the German Umweltprämie and the US Cars program, and their cost-effectiveness in relation to reducing CO₂ and NO_x emissions and improving road safety. These three schemes were selected as they each display different designs and have collected detailed data to undertake disaggregated analysis. The impacts of the schemes were monetised, providing an approximate evaluation of their societal cost-effectiveness in reducing CO₂ and NO_x emissions and improving traffic safety, and only evaluates how well fleet renewal schemes deliver benefits beyond what they may or may not deliver in terms of benefits/disbenefits related to automobile industry support.

The key messages from this study can be summarised as follows:

• Scheme design: For the benefits in terms of reduced CO₂, NO_x emissions or increased road safety to exceed the costs associated with vehicle replacement, one 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, NO_x and safety benefits are eroded. The schemes should target older vehicles that are still being driven. In Europe, for example, this means covering 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 on average, lighter and smaller vehicles were traded in for medium-sized vehicles than vice versa, which reduced the benefits of the scheme. The French scheme benefited from imposing a type-approval CO₂ limit for new cars and retiring very old large emitters, but that may have led to a very high share of new diesel vehicles, which strongly limits the lifetime NO_x benefits. Increased awareness of the monetised societal benefits of avoided NO_x, in addition to CO₂, could have helped to improve the overall cost-effectiveness of the scheme. For example, the report suggests that there may have been a case for differentiated incentives for petrol and diesel vehicles.
  
  
• Cost-effectiveness (considering cumulative, but undiscounted, impacts over the lifetime of the new car): Figure 1 summarises the study’s findings regarding the cost-effectiveness of the fleet renewal schemes analysed from the perspective of CO₂ and NO_x reduction and increased safety.

Figure 1: Cost-effectiveness of the French, German and US Fleet Renewal Schemes

 

From a societal perspective, the US scheme cost nearly EUR 1 billion in destroyed assets (scrapped vehicles). The largest monetised benefit comes from avoided NO_x emissions (EUR ~500 M), followed by avoided casualties (EUR ~150 M), leading to a total quantified recovery of approximately 80% of the societal cost (represented here by the value of the scrapped vehicle). 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, NO_x and safety impacts throughout. As a result, it was less cost-effective in delivering beneficial CO₂, NO_x and safety outcomes with the benefits quantified here representing only around 25% of the estimated costs.

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

• Impacts on CO₂: The three schemes contributed to 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 monetised value of that impact seems quite small (less than EUR 5 million in the US, less than EUR 10 million in Germany and France, when using an estimate of the external cost of EUR 25 per tonne CO₂ in 2010, increasing to EUR 40 per tonne in 2020) and the overall results suggest that 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 NO_x: The monetised NO_x impact seems to be 1-2 orders of magnitude higher than the CO₂ impact (about EUR 500 million in the US, about EUR 300 million in Germany, and about EUR 100 million in France), and it does suggest which vehicles such a scheme ought to target: in general, vehicles older than around 15 years. The French example shows that a large share of diesels among replacement vehicles erodes the reduction in NO_x emissions, and should thus be accounted for.
  
  
• Impacts on traffic safety: In the long run, the US scheme was estimated to contribute to about 2800 fewer serious injuries, of which some 40 fatalities. Electronic Stability Control and the effect of general improvements in vehicle safety account for 70% of the impact. For Germany, it was estimated that about 6100 injuries and around 60 fatalities will be avoided due to the scheme. Also here, the conclusion seems to be that “older cars should be retired”. The French scheme was estimated to have had a much more limited safety impact: only about 330 serious injuries avoided, of which around 20 fatalities.
  
  

One of the key findings of the report is the necessity to put in place targeted incentives and sufficient differentiation so as to capture not only CO₂ or fuel economy benefits but also, more importantly, NO_x and safety benefits since these benefits tend to outweigh the former for the fleet of cars targeted by fleet renewal schemes. Another finding is the need to design schemes that target older vehicles that are still in use – retiring vehicles that travel little provides minimal benefits.

Finally, there are trade-offs that may be involved in developing effective fleet renewal schemes in terms of environmental and safety benefits. Schemes seeking principally to reduce CO₂ emissions or improve fleet-wide fuel economy should, perhaps counter intuitively, target more recent vehicles since their higher vehicle kilometre travel outweighs the per-kilometre emissions of older, less-used vehicles. It also underscores the need to control for the type of replacement vehicle chosen in the fleet renewal scheme – lower CO₂-emitting diesels improved the CO2-profile of the French scheme but also eroded the lifetime benefits of the scheme due to an increase in more costly NO_x emissions.

 

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• OECD work on
• Publications and reports
• OECD Database on instruments used for environmental policy
• International Transport Forum (ITF)
• Fédération internationale de l'automobile (FIA Foundation)
• Global Fuel Economy Initiative (GFEI)