Last week, it was reported that the Department for Transport is considering introducing a diesel scrappage scheme. Under this policy, the government would give cashback to motorists who trade in their old polluting diesel vehicle. A diesel scrappage scheme would help to accelerate the shift away from diesel vehicles, removing one of the biggest sources of harmful air pollution from the roads for good.
What’s the problem?
Readers of this blog will be familiar with the issue: each year around 40,000 premature deaths in the UK are linked to poor air quality. A recent EU report found that in the UK six million workdays were lost each year to air pollution and that the health-related externalities totalled €28 billion. Air pollution is damaging people’s health, and adding costs to public services and businesses in the process. The source of the problem in pollution hotspots is road transport, which produces over 95% of the toxic fumes in these areas. And diesel vehicles in particular are responsible, as they emit many times more nitrogen dioxide than petrol alternatives.
The Government urgently needs to find a solution to this problem, following their latest defeat in the High Court last year. The judge ruled the Government’s air quality plan was inadequate. The Government now has until April 2017 to produce a new draft plan to bring the UK into full legal compliance by 2019 at the latest. This strategy must be confirmed by July 2017. Air pollution is also being driven up the agenda by the Government’s decision to allow a third runway at Heathrow. Local campaigners say they are planning to use the air quality concerns to block the project in the courts.
Context for the scrappage scheme
The UK had a vehicle scrappage scheme in 2009, introduced in response to the financial crisis. Rather than an environmental measure, it was a stimulus for the domestic car industry, which had seen new vehicle registrations fall by 30% between the first quarter of 2008 and the same time in 2009. Under the scheme, vehicles over 10 years old could be scrapped in return for a £2,000 discount off a new vehicle. The Government allocated a £400 million budget for the scheme.
The idea of a scrappage scheme for polluting diesel vehicles has been around for a while. But, until now, the Government has always been dismissive on the grounds of cost. In April last year, a source from the Department for Environment, Food and Rural Affairs was quoted saying that there was "no proportionate way to appropriately target such a measure to the areas where it would be most needed and it would be prohibitively expensive, as well as an ineffective use of resource to offer a scheme indiscriminately".
Factors to consider when designing the scheme
The effectiveness of a diesel scrappage scheme will depend on its precise configuration. There are three issues in particular that the Government has to consider: first, how it is going to pay for it; second, how it is going to target it geographically to ensure the scheme eases pollution in hotspots; third, what types of vehicle trade will be eligible for a grant.
First, a diesel scrappage scheme has the potential to be very expensive, unless it is part of a suite of policies that is revenue neutral. One suggestion is to increase Vehicle Excise Duty (VED) on new diesel vehicles to fund the scrappage scheme. This would also serve to disincentivise purchases of new diesels, most of which continue to fail to achieve EU air pollution limits when tested under real-world conditions. Another approach could be to levy a “toxicity charge” on motorists entering pollution hotspots in old, polluting vehicles, like the Mayor of London is introducing in the capital later this year. This levy would ensure motorists pay the full social costs of their pollution, as well as providing a revenue to fund charges.
Second, a diesel scrappage scheme must be targeted to remove dirty vehicles from where pollution is illegal. If an old diesel car that only ever drives around rural English villages is taken off the road, then it won’t help bring cities like London and Birmingham into compliance with the law. One approach could be to restrict eligibility for the scheme to vehicles registered to properties in or near a pollution hotspot. However, there would be no guarantee that these will be the only vehicles travelling into hotspots. The Government could also explore ways of linking the scheme to its new Clean Air Zone network so that the cashback is available to those who are affected by their introduction.
Third, the Government must carefully consider which vehicle trades are eligible for cashback. One condition could be that the old diesel must be exchanged for an ultra-low emission vehicle, such as a pure electric car. But some drivers of old diesel cars may want to scrap their car altogether and switch to just cycling or using public transport. Others may still need a vehicle with an internal combustion engine because of the long distances they are driving. But while a petrol car would reduce air pollution relative to a diesel, it would not help cut carbon emissions, another important government policy objective. The less flexible the scheme is, the fewer old diesels it will successfully take off the road.
If implemented correctly, this policy could form a big part of the Government’s response to the air pollution problem. It should complement smart regulation, such as an increase in the number of low emission zones. Bright Blue has campaigned for central government to devolve more powers and funding to English cities to enable them to set up low emission zones in pollution hotspots.
Replacing diesels in the vehicle pool is a major challenge: there are over 11 million diesel cars on the roads in the UK, or 38% of the whole car fleet. In terms of new vehicles, sales of diesels have started to decrease, with the most recent data showing a 4% drop relative to the same month in 2016. This is gradually unwinding efforts by policymakers since the 1990s that encouraged diesel over petrol, because of perceived lower carbon emissions. For instance, the then Chancellor of the Exchequer Gordon Brown cut vehicles taxes for diesels in the 2001 Budget.
The benefits of this shift away from diesel are broader than the purely environmental. As the industrial strategy confirmed last month, ultra-low emission vehicles are a priority sector for the Government, and crucial to the UK’s long-term economic prosperity. Now is the time for the Government to be ambitious with its domestic policy framework, so that it can establish a leading position in these new technologies.
Sam Hall is a researcher at Bright Blue