The Green Piece: Tuesday 6 October, 2009
The UK's car scrappage scheme may have been dubbed a resounding success by the majority of car manufacturers and consumers alike, but it hasn't won plaudits from all corners.
"This is little more than a panicked way of propping up the industry as, given time; those cashing in the grants would most likely have bought the new car anyway.
"Car scrapping initiatives are often mistakenly labelled as green because they subsidise the purchase of cars that are usually, more fuel-efficient than those they replace, but the schemes are by their nature wasteful and routinely fail to take into consideration the amount of energy required to build a vehicle in the first place."
That was the damning verdict of Andrew Davis, director of the Environmental Transport Association (ETA) as he deemed the extension to be "environmentally short-sighted" (see article). So does he have a point?
Regular readers of The Green Piece Column will recall our article on the scrappage scheme back in June, where we put forward the idea that the scheme be tied to the greenest cars. If incentives were only made available to buyers of new cars that emit less than 130g/km of carbon dioxide (CO2), which is the EU target for 2012, then much of the environmental cost of manufacturing new cars could have been offset.
The failure to offer an environmental hook to the extension of the scheme is disappointing and appears to be a missed opportunity.
There are ominous questions looming too, as to what the motor industry will do when the scrappage scheme ends. Without similar schemes in the rest of Europe – and particularly since the German scheme ended – the impact of the British version is already stifled. According to the Society of Motor Manufacturers and Traders (SMMT), production in the UK fell back 31.5 per cent year-on-year in August after four consecutive months of scrappage-led improvements. Indeed stats from the SMMT suggest the underlying new car market is weak with the 67,006 sales in August being some 10,500 behind the total in August 2007 and 15 per cent below the 78,800 averaged between 1999 and 2008.
The fleet industry too has remained comparatively unmoved by the scrappage scheme with sales down 22 per cent in August; and September figures, due out this week, may be crucial in determining the direction of the industry.
How the environment can benefit
Despite the criticisms, the announcement of the scrappage scheme extension prompted roars of approval and it's easy to see why. The industry was teetering with a 30.5 per cent sales decline in March, which was reversed into a six per cent rise in August. What's more is that Honda's UK plant, which employs 3,400 people, is running again and the extension of the scheme from 300,000 to 400,000 vehicles should see the car market beyond the potentially damaging VAT rise in January.
Environmental criticisms have also been shot down. According to a study by Clean Green Cars, vehicles traded under the scheme are almost never cars that would normally be traded in against a new car. It finds that most new cars are sold to replace a vehicle that is two-four years old, and very rarely do they replace a car that is 10 years old.
What's more is that because the new car is generally small, the average CO2 emissions are comparatively low – 131.8g/km is the current average quoted by the SMMT, which is well below the average of 188.4g/km for vehicles that are 10 years old.
The scheme also appears to be self-funding so remarks that the money may be better spent elsewhere appear to be misplaced. A 15 per cent VAT on new car purchases balances the £1,000 subsidy. What's more is that there is sufficient income made from PAYE on workers in component suppliers, dealers and all the other parts of the supply chain.
We believe that the ETA's criticism of the scrappage scheme was too one-sided. Yes there are concerns about the scheme, but its merits – both for the environment and the economy – need to be acknowledged.
However, that doesn't mean that more couldn't be done. A cap on the CO2 emissions of new cars would be sensible – at the moment someone could, in theory, scrap an old car for one that does more harm to the environment.
Unfortunately however, there has been no such tie-in with the latest low emission cars and so we put forward the suggestion that there should be a guarantee that the profits earned by carmakers will be invested back into research and development of the next generation of green cars, such as plug-in hybrid electric vehicles and fuel cell cars.
Only with a genuinely green tie-in can the scrappage scheme develop from a stop-gap solution to a long-term cure for the industry's ills. By investing in new technologies now, the motor industry can avoid reliving its failings of this global recession and start to embark on a brighter, cleaner and more secure future.