Scrappage scheme will have environmental benefits

There has been criticism of the extension of the car scrappage scheme on the grounds that it is subsidising people who would have bought a car anyway. Critics claim it is an expensive way of saving CO2.

This is to misunderstand the situation for three reasons:

Firstly, cars traded in under the scheme are almost never cars that would normally be traded in against a new car. In normal conditions, most new cars are sold to replace a car that is 2-4 years old – new cars very rarely replace a car that is 10 years old. Under the scrappage scheme, dealers are reporting that it is usually the old, second car in the household that is being traded in against a new, generally small, car.

Secondly, because the new car is generally small, the average CO2 is comparatively low. The current figure is 131.8 g/km of CO2, well below the average of 188.4 g/km of CO2 for cars that are 10 years old (source SMMT).

Thirdly, the scheme is at least self-funding. The 15% VAT on new cars balances the £1,000 subsidy, even before the income from PAYE on workers in component suppliers, dealers and all the other parts of the supply chain is considered.

Clean Green Cars acknowledges that there are issues with the scheme. For example, it should have an upper limit for CO2 – in principle someone could scrap an old car for a new one that emits higher CO2. However, on balance Clean Green Cars regards it as a positive development.

“While not perfect, the extension of the scrappage scheme should be welcomed,” says Jay Nagley, publisher of Clean Green Cars. “It does reduce overall CO2. Supporting the economy in this way is in the long-term interest of the environment. People worrying about their jobs do not worry about the planet – economic stability is a pre-requisite for environmental action.”