Comparable Global Policies
In the aftermath of the 2008 financial crisis, several countries had formulated the vehicle scrappage
policy to boost the economy of the nation. Some of these policies are discussed below.
1. USA
US’ Car Allowance Rebate System (CARS), also known as ‘Cash for Clunkers, passed by the National
Highway Traffic Safety Administration (NHTSA), came into effect in July 2009. The policy was first
proposed by Alan Blinder in 2008, showcasing its tripartite effect on the environment, economy,
and economic inequality. An alternate bill was proposed by three other members of the legislature
that focused more on the fuel economy of the country. However, CARS won the debate with 298
to 119 votes. (Office, 2021). This was a 3-billion-dollar program under which those vehicles that
did not qualify the government-mandated fuel efficiency standards were to be scrapped. The
people who were getting their old cars scrapped were eligible for a rebate of $3500-$4500 on the
purchase of a new car.
The policy came into effect for the purpose of reducing air pollution but, more importantly,
boosting the economy after the financial crisis. Under the presidency of Mr. Barack Obama,
initially, a fund of 1 billion USD was allocated to the policy. However, due to its popularity, an
additional 2 billion USD had to be allocated. Under this scheme, approximately 680,000 vehicles
were scrapped. This policy also resulted in consumer spending, resulting in the boost of the US
auto manufacturing sector. However, the program waged another war for supplementing the
funds for the proposed bill.
(Administration, 2009) For the citizens to avail of the benefit, the cars must be less than 25 years
old and have an EPA-related fuel efficiency of less than 18 miles per gallon, be in a drivable
condition, and be scrapped. Moreover, the new car being purchased should have an EPA-related
fuel efficiency of more than 22 miles per gallon. The program ended in August 2009.
The program has been both lauded and criticized. The supporters argued that the program
resulted in a reduction of air pollution and provided a needed stimulus to the economy at the
time. (Becker, 2019) The liberal Mises Institute called the program an example of the “Broken
Windows” fallacy, wherein spending wealth results in the creation of wealth. It was also discussed
that it resulted in a shortage of used cars and resulted in a surplus of unfulfilled requests among
the auto-dealers. (Edmunds, 2009) It also increased the taxes of the commoners by an average of
$24,000 per transaction.
2. Germany
Germany’s 'Umweltpramie' or 'Abwrackpramie' scheme was launched in January 2009. It is the
largest vehicle scrapping policy in the world to date and had a budget of approximately 5 billion
euros. The policy was brought in for two main reasons: boosting the economy of the nation
through the automobile sector and reaching the carbon goals of the country. Under this scheme,
the auto industry paid an incentive of 2,500 euros to the consumer to purchase a new Euro 4
compliant car in exchange for any car that was older than nine years old, which was to be
scrapped. Unlike the Indian policy, this scheme was only applicable to privately owned vehicles
only. The Greman automobile sector saw an unexpected rise of 41% in the year 2008-2009, which,
in conjunction with this scheme, resulted in the sale of 2.8 million new cars.
(Securities, 2020) It has been registered that this policy resulted in the reduction of particulate
matter by 99%, nitrogen oxide by 87%, and carbon monoxide by 74%, while also increasing the
fuel efficiency by an average of 20%. However, the scrapping activities were not closely monitored,
and it is believed that most used cars were imported from East Africa and other parts of Europe
to avail the government subsidy. It was reported that car imports surged by 11.5% between
January and May 2009, reflecting in particular imports of relatively small and less expensive cars
from France, Italy, Slovakia, and Romania.
In January 2021, the German Transport Ministry (BMVI) introduced a similar policy to replace the
old trucks in the country with new ones. The €5000 will be given to the owners as an incentive to
invest in “intelligent trailer technology,” such as technologies for tyre pressure measurement or
aerodynamic attachments. This comes as a result of the extremely high greenhouse emissions in
the country through the automobile industry. Moreover, Germany had allocated a target of minus
thirty-eight percentage of carbon emissions by 2030, in line with the Paris Agreement, and this
policy was brought in effect to achieve that goal.
3. China
China launched the scrappage program for the first time in June 2009, with a similar purpose of
boosting the automobile sector and the overall economy. (Securities, 2020) The Government of
China initially offered between RMB 3000 and 6000 for the scrappage of a vehicle older than eight
years. However, the program started to fail because of the lower end of the incentive. The
incentive was increased by 2000 RMB, after which 4.6 lakhs new vehicles were sold, bringing the
total spend to RMB 6.4 billion.
In August 2020, the COVID pandemic again led to the downfall of the global economy. To battle
this, the Chinese government re-launched a new Vehicle Scrappage Policy which focuses on
generating revenue from licensing the scrapping yards and developing the scrap industry, which
was mostly unorganized. Without a license, the yards will be deemed illegal.
The policy focused on the increase in automobile population on the Chinese roads (260 million
vehicles as of 2019), which is leading to congestion and pollution. However, only 9.1 million of
these vehicles were scrapped in 2019. Moreover, it has been found that cars that do not meet the
fitness criteria are being refurbished and resold, which affects the automobile sector and economy
of the country.
(VRW, 2020) The Chinese have estimated the vehicle scrap market to be worth 40.1 billion yuan
and the market for reconditioned auto parts to be 79.9 billion dollars. This policy aims to generate
revenue by converting the unorganized scrapping sector to the organized sector, which will result
in better accounting of the revenue generated.
4. Canada
‘Retire your Ride’ or Canada’s voluntary vehicle scrapping policy was launched in January 2009.
This policy was different than any other policy as it only focused on old, polluting vehicles that
were no longer fit to be driven. The policy was used to scrap the vehicles manufactured before
1995. Rather than offering a monetary incentive, the consumers were given a car-sharing
membership or 300 Canadian dollars or a public transit pass.
The scheme, however, was a success, as the incentives were directly given by the OEMs like
Hyundai, Chrysler, Ford, and General Motors of up to C$3000. (Securities, 2020) The program
helped permanently retire 1.2 lakh vehicles, much higher than the initial target of 50,000 vehicles.
The program ended in March 2011, and from the period of Jan 2009 to March 2011, a total of
138,600 vehicles were removed from the road.
(Shaikh, 2020) Apart from this scheme, the government had earlier partnered with Environment
Canada to launch another program called Car Heaven, but it was not federally funded. The
learning from this program was used to formulate the Retire you Ride program later.
Canada has always been involved in forming eco-friendly policies. (Environment and Climate
Change, 2011) Schemes like Scrap it, launched in April 1996 that ran till August 2020, resulted in
the scrapping of approximately 50,000 cars. Under this program, there is a purchase incentive
given to the consumer of up to C$6000 that can be used only on the purchase of a new or used
EV. Other rebates on electric bikes, car-sharing passes, public transports were also provided.
(rdnewsNOW, 2020) Recently in April 2019, Canada launched a Plug’n Drive scheme where a
scrappage incentive component was added in February that year. It is funded by the M.H. Brigham
Foundation, and operates in collaboration with the Clean Air Partnership, and gives out an
incentive of up to C$1000 for the purchase of EVs.
5. United Kingdom
The UK vehicle scrappage policy was also introduced in the 2009 annual budget by the then
Chancellor of Exchequer, Alistair Darling, with an objective to reduce vehicular emission from the
old, more polluting vehicles and increase the sales of newer automobiles. The UK government
incentivized consumers with £1000 towards the purchase of a new car on scrapping their old
vehicle. The allocated budget was £300 million, and it led to the purchase of 300,000 new cars. To
avail this scheme, the car owner should have been its owner for more than twelve months. This
scheme was extended twice and finally finished at the end of March 2010.
Along with the government, the car manufacturers also offered a rebate of £1000 on purchasing
a car from their company. (Guradian, 2010) The scheme did end up reducing the emission by 5.4%
in comparison to the previous year and also led to an increase in cars purchase by 26%.
(Studies, 2010) However, the scheme was criticized, citing that the reduction in emission per car
will be offset from the additional cars on the road. Moreover, this scheme will only benefit a single
industry. It was also observed that post this scheme, the automobile manufacturers had raised
the price of the vehicles considerably. The sales of new cars did rise in the short run, especially in
July 2009. However, so did the prices of used cars. Moreover, this trend was not found to be
sustainable, and the sales had again declined in 2010.
In 2020, Prime Minister Boris Johnson proposed an incentive of £6000 for scrapping the petrol
and diesel cars and switching to EVs, majorly to boost the economy post coronavirus. However,
no concrete decision was taken in this matter.
Bibliography
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Edmunds. (2009). Cash for Clunkers Results Finally In: Taxpayers Paid $24,000 per vehicle Sold.
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Office, G. A. (2021). GAO-10-486: Lessons Learned from Clash from Clunkers Program.
rdnewsNOW. (2020). Program offering cash rebates to scrap heavy polluting vehicles comes to
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https://www.cleanenergywire.org/news/german-transport-ministry-launches-scrappage-supportprogramme-trucks