Better cars or older cars? Assessing CO₂ emission reduction potential of passenger vehicle replacement programs

The primary motivation for the vehicle replacement schemes that were implemented in many countries was to encourage the purchase of new cars. The basic assumption of these schemes was that these acquisitions would benefit both the economy and the environment as older and less fuel-efficient cars were scrapped and replaced with more fuel-efficient models. In this article, we present a new environmental impact assessment method for assessing the effectiveness of scrappage schemes for reducing CO₂ emissions taking into account the rebound effect, driving behavior for older versus new cars and entire lifecycle emissions for during the manufacturing processes of new cars. The assessment of the Japanese scrappage scheme shows that CO₂ emissions would only decrease if users of the scheme retained their new gasoline passenger vehicles for at least 4.7 years. When vehicle replacements were restricted to hybrid cars, the reduction in CO₂ achieved by the scheme would be 6-8.5 times higher than the emissions resulting from a scheme involving standard, gasoline passenger vehicles. Cost-benefit analysis, based on the emission reduction potential, showed that the scheme was very costly. Sensitivity analysis showed that the Japanese government failed to determine the optimum, or target, car age for scrapping old cars in the scheme. Specifically, scrapping cars aged 13 years and over did not maximize the environmental benefits of the scheme. Consequently, modifying this policy to include a reduction in new car subsidies, focused funding for fuel-efficient cars, and modifying the target car age, would increase environmental benefits.