Germany offers a government discount of $3,280 on a new car bought by owners who scrap their old polluting cars. The US Congress is considering a discount of $4,500 if drivers crush old gas-guzzlers and buy fuel-efficient new models.
It’s an unlikely way to save the economy—and the environment—at the same time, but a simple program adopted two weeks ago by Germany seems to be a runaway success. It offers a government discount for new cars bought by owners who scrap their old cars. The hotline for applications got 270,000 calls on Monday, and a further 150,000 on Tuesday, said local media.
Under the program, owners of cars at least 10 years old receive a discount of EUR 2,500 (roughly $3,280) if they buy a new car that meets Euro-4 emissions standards. The recipient must provide paperwork to prove that the vehicle replaced was scrapped and its parts properly recycled. The scrapping program was part of an environmental bill to reduce CO2 emissions, but it won support from automakers who believed it would boost anemic sales of new cars.
In legislation introduced earlier this month in the US House and Senate, American car owners could get vouchers of up to $4,500 when they scrap their old fuel-inefficient vehicles and buy a vehicle that meets high-mpg targets. The proposal, called “Cash for Clunkers,” calls for the new vehicles to be less than $45,000 and a 2004 model year or later. The legislation aims to remove 1 million polluting gas-guzzlers a year for four years—at a cost of $1 billion to $2 billion per year.
The German government allocated EUR1.5 billion—enough to provide subsidies for 600,000 new cars—although researchers projected lower numbers. The program might increase new-car sales in Germany by 200,000 vehicles, or roughly 7 percent of the country’s market of 3 million new cars a year, said market researcher Polk. PricewaterhouseCoopers expected up to 300,000, or 10 percent.
Calls for the total pool of subsidies will have arrived in less than a week, though the ultimate number of participants remains to be seen. According to the association of German vehicle manufacturers, Verband der Automobilindustrie (VDA), reducing the average age of the country’s vehicle fleet by just one year could eliminate 2 million metric tons of CO2 emissions each year.
An Idea Worth Trying?
In the US, few such programs exist. California and other states have funded various iterations of Cash for Clunkers, with the goal of removing the oldest, most polluting cars from the roads.
California’s program paid $650 to $1,000 for currently registered and running vehicles with first generation catalytic converters, or no converters at all. Even when new, these cars produced 10 times or more the harmful emissions of a new car today. And after 20-plus years, many of them were grossly out of tune, routinely failing California’s annual “smog check” inspection.
The programs are remarkably cost effective, looking at volume of pollutants eliminated against cost. Car collectors often loathe these programs and lobby strongly against them, since they’re an incentive for old cars to be destroyed. While even the most paranoid admit that voluntary Cash for Clunkers programs are a far cry from black-clad government agents breaking into garages to seize and crush your cherished old car, distrust of environmental laws seems to run high among collectors.
So what do you think: Should the US create scrapping incentives, whether for economic recovery or environmental reasons—or both?