A TREMOVE development project adding a waste materials module and introducing endogenous scrappage decisions
This study supports the general IPTS research work in the context of the Integrated Product Policy (IPP), adopted by the European Commission in June 2003. The IPP aims to reduce environmental impacts from products and services throughout their full life cycle. The focus is on market driven measures to reach this goal.
The study also contributes to the research on the new policy framework about Sustainable Consumption and Production, which will propose effective and concrete actions towards a low carbon, resource and energy efficient economy. In practice the TREMOVE model is extended with a materials database, to assess the waste flows of end of life vehicles in detail, and TREMOVE is further developed to include endogenous scrappage. Two policies were tested: a feebate (bonus-malus) system and a scrappage scheme.
A feebate system proved to be a good market-based instrument to guide consumers towards more fuel efficient vehicles. In the case considered in this study, average CO2-emissions of new sold vehicles are about 7% lower with a feebate system in place. This relates to a subsidy-tax spectrum, depending on the CO2 level of the car, of 500€ subsidy to 1800€ tax for the average vehicle categories.
It was shown that a scrappage policy can successfully accelerate penetration of new, environmental friendlier vehicles and generate an economic incentive to car production industries. A 2000€ subsidy causes a 25% sales increase over the period of the scheme, with the largest effect in the first year(s). The policy causes a maximal emissions reduction of 2.5% for CO2, 18% for NOx and 10% for PM, early in the scheme. The effect diminishes as fleet renewal rate slows down after the scheme, because sales drop after the scheme. In this sense the scheme accelerates emission reduction trends (NOx, PM) and slows down emission increase trends (CO2) only with a few years.
The level of the subsidy determines the success of the policy, but also the government loss due to accumulated subsidies. These subsidies need to be compensated by other taxes if the government wants to hold the same overall revenue-loss ratio. A scheme with a subsidy of 2000€ per scrapped car can cost several billion € for EU27 in terms of scrappage subsidy.
A combined feebate – scrappage policy takes best of both individual policies. The CO2-emission reduction of average fleet is better in a combined policy with half the scrappage subsidy compared to scrappage scheme exclusively. For other pollutants, the emission reduction is less.
If designed in a careful way, a feebate – scrappage combined policy can be revenue neutral for government with a feebate system generating revenue which is applied for scrappage subsidies.
JRC Institute for Prospective Technological Studies (IPTS)
Íko-Institut (Berlin), ISI Fraunhofer (Karlsruhe)
Kris Vanherle, Bart Van Herbruggen
+32 16 74.51.29