Dr Ben Lane of WhatGreenCar.com anticipates the next green car policy challenge for 2010...
Imagine for a moment that the government had not introduced the car scrappage scheme last year. It hardly bears thinking about. Not only would there be little left of the UK automotive sector, thousands of manufacturing jobs would have been lost, and the UK economy would probably still be in recession. As a one-off measure, the scrappage scheme single-handedly saved the sector's bacon. After two quarters of plummeting sales, with the scheme in place, car registrations increased by over 20% in the second half of last year. Phew.
Although never intended as an environmental incentive, the scrappage scheme has also had the effect of amplifying the shift to smaller cars which was already happening in response to the credit crunch. While the mini and super-mini segments normally account for around 40% of the new car market, they represent over 70% of cars registered through the scheme. Figures from SMMT show that cars registered under the incentive had an average CO2 value of just over 133g/km, 10% below the new car average, and almost 50 g/km below the average emissions of the vehicles scrapped.
With the end of the scheme in sight (31 March), there are some valuable lessons to be learnt from the success of this particular policy. Firstly, targeting consumer incentives at the point of purchase is a highly efficient use of resources. Evidence from across Europe is that purchase incentives typically result in twice the market shift achieved by incentivising annual circulation tax (e.g. VED road tax) to the same degree. Research also shows that the threshold size of a successful incentive in the UK is around £1,200 - so the £2,000 scrappage incentive has been well sized and perfectly targeted.
The real legacy of the scrappage scheme will be that it has confirmed how to directly and efficiently incentive the low-carbon car market. As capital cost is one of the key factors in vehicle choice, purchase incentives will always be well received by consumers who (in the main) are put-off lower-carbon options if price is compromised. True, the new First Year road tax charges due in April will act as a 'carbon purchase tax' which will reduce consumer interest in cars with high CO2 emissions. That's the 'stick'. However, the key lesson from the scrappage scheme is that, if we want to continue to reduce new car CO2, we also need to offer new car buyers a carbon-related financial 'carrot'.
I propose that the design and financing of a new CO2 purchase incentive should be our next green car challenge.
