Green vehicle replacement programs as a response to the COVID-19 crisis: Lessons learned from past programs and guidelines for the future

In response to the economic downturn caused by measures intended to confine the spread of COVID-19, purchase premiums and vehicle replacement programs are being considered to spur the economic recovery of the automotive industry. To inform policies currently being considered, this briefing quantifies the GHG and pollutant emissions impact of potential vehicle replacement programs in the largest European vehicle markets.

Experiences from previous vehicle replacement programs implemented after the 2007-2008 financial crisis show that relatively low GHG emission and air pollutant savings were achieved at high cost. Programs that set CO2 limits had a higher and longer-term effect on GHG emissions because they shifted demand to eligible low-emission vehicles instead of pulling forward sales from the following years.

A hypothetical 2020 vehicle replacement program would achieve the largest environmental benefit if it was limited to battery electric vehicles only. In addition to avoiding 100% of the local NOx and CO emissions, as well as most of the PM emissions, incentivizing an earlier exchange of old cars with battery electric vehicles in comparison to their later replacement by average cars would reduce 89-93% of GHG emissions in Austria, France, and Sweden, while 62% of the GHG emissions would be avoided in Germany.

In most European countries, the real-world GHG emissions of the 1990 to 2020 new car fleets remained comparatively constant despite a decrease in the official CO2 emission values. Vehicle replacement programs without a CO2 threshold would thus have practically no GHG emission impact. In addition, providing purchase premiums for vehicles above the mandatory 2021-2024 CO2 target would contradict the rationale of the EU CO2 fleet regulation. Restricting vehicle replacement programs to a CO2 threshold of 110 g CO2/km in WLTP would result in about 28% less GHG emissions in Germany, while only 5-11% would be saved for the lower-CO2 vehicle fleets in Italy, France, and the Netherlands.

Reductions in NOx and PM emissions are likely to occur if old diesel cars are replaced by vehicles meeting the current Euro 6d-TEMP and 2021 Euro 6d standard, while only little improvements would be achieved if older gasoline cars are replaced. Replacing diesel and gasoline cars by battery electric vehicles would save 100% of the local NOx and most of the PM emissions.

In the long term, a bonus-oriented support of low emission vehicles puts a strain on the national budget and the average taxpayer. For this reason, and to increase the incentive towards buying lower-emitting vehicles, bonus payments should be complemented by a higher tax (malus) on the purchase of high emission vehicles, as in bonus-malus (feebate) systems.