Car scrapping in Israel—Lessons and recommendations
An excerpt from the upcoming "Recent Economic Developments (139)" that will soon be published: Old vehicles cause a higher amount of pollution than newer vehicles, leading to a significant negative impact to public health.
Old vehicles cause a higher amount of pollution than newer vehicles, leading to a significant negative impact to public health. In addition, old vehicles are more dangerous than new ones, since the safety level of the vehicle models improves over time. It is therefore sometimes worthwhile for the State to operate a car scrapping program—purchasing old vehicles from residents and removing them from operation—thereby preventing these damages.
The State of Israel, through the Ministry of Environmental Protection and the Ministry of Transportation, ran a scrapping program between 2010 and 2013: 28 thousand old cars (20 years old or more) were scrapped in Israel, with the owners of those vehicles receiving a grant of NIS 3000 in exchange for their agreement to scrap the vehicle.
When the program was approved, estimates of the economic benefit derived from the reduced pollution—about NIS 3300 per year (calculated for every year prior to the time when the vehicle would normally be scrapped) for vehicles manufactured prior to 1994—and of the benefit derived from the improved safety that comes with a younger generation of vehicles, were calculated. This review adopts the first estimate and recalculates the second.
An analysis of accident data shows that the seriousness of injury in traffic accidents is higher with old vehicles: the likelihood of being killed is slightly more than double, and the likelihood of being seriously injured is about one-third higher. The cost to the economy of accidents increases with the seriousness of injury and is comprised of the direct costs of medical treatment and loss of work days (including among family members) and from the expected loss in respect of those killed in such accidents. Multiplying these costs by the seriousness of injury according to vehicle age, and by the likelihood that a vehicle will be involved in a traffic accident, leads to an estimated cost of NIS 1000 per year for an old car, which is much higher than the estimate made in the past.
The total external costs (pollution and accidents) of owning old passenger vehicles are much higher than the market price of these vehicles, which is about NIS 3000. There is therefore considerable reason for renewing the scrapping program for old vehicles.
If the scrapping program is renewed in the future, it is worth considering applying it in a graduated structure—increasing the monetary grant from month to month (or from quarter to quarter) within a given budget—since this will make it possible to more efficiently “cleanse” the market of old vehicles: For some owners of old cars it will be worthwhile to scrap them for a relatively small amount (for instance, less than NIS 3000, the amount given in 2012 and 2013). Since the budget for the program is limited and a delay involves a risk of missing the opportunity to scrap the vehicle, owners will be quick to take advantage of the program in the first few months.
The safety of new vehicle models is constantly increasing. From a safety standpoint, the benefit to the economy of scrapping programs is therefore expected to persist, and to become more relevant and more important than it was.
The full article in English will be published in the next few days.