Week in Review

Govt looking into vehicle scrappage scheme

After considering a range of options for lowering carbon emissions from our ageing vehicle fleet, the Government settled on a planned electric car feebate scheme and new emissions standard. But it is also still investigating a vehicle scrappage programme to encourage people to surrender old cars.

The age of cars and other light vehicles owned and driven by New Zealanders is high compared to other countries, and continuing to rise.

The average age of our light passenger vehicle fleet increased from 11.7 years in 2000 to 14.4 years in 2017. By comparison, the average age of cars and light vehicles in the United States was 11.6 years for cars and light trucks in 2016, and 10.1 years in Australia. In Canada in 2014 it was 9.3 years and in Europe just 7.4 years.

Early last year, the Government considered 11 policies as it searched for a way to reduce greenhouse emissions from that ageing (and often inefficient and unsafe) fleet of cars, SUVs and light trucks. 

In the end, it went ahead with the controversial feebate scheme and an emissions standard.

But it is also continuing to investigate a voluntary vehicle scrappage programme, according to documents released to Newsroom under the Official Information Act.

Newsroom reported in August on the Government's consideration of one of the rejected plans, a ban on importing fossil fuel vehicles from 2035 onward. In a Cabinet paper, Associate Minister for Transport Julie Anne Genter said that the import ban and seven other options "were investigated, but discarded due to being either ineffective, poor value for money, or regressive".

Scrappage scheme has precedent

In an April 2018 draft Cabinet paper, Genter looked to international and local precedent for a scheme to incentivise people to surrender ageing vehicles.

This included two scrappage trials previously run by the Ministry of Transport, in 2007 and 2009.

The 2007 trial was held in Auckland and, according to Genter, was successful - costing $400 per vehicle but producing estimated social and health benefits of $340 to $871 per vehicle.

However the 2009 trial, held in Wellington and Christchurch, failed.

"Insufficient numbers of vehicles were received resulting in the road safety, health and CO2 benefits being too low to offset the schemes' costs," Genter wrote.

The Ministry's website reports that: "The Wellington and Christchurch trials showed that a nationwide scrappage scheme was unlikely to be cost effective due to the low number of vehicles received and the relatively low overall social and environmental benefits, relative to the costs".

'...the scrappage scheme is in the hands of NZTA and we're expecting an update in the next month.'

Overseas, scrappage schemes "are usually in places that have car manufacturing and are an incentive for people to buy new cars," Genter told Newsroom.

She said the Government was interested instead in how a similar scheme could potentially be used "as a just transition" from a higher-emission fleet to a lower-emission fleet.

"The general thrust is that older vehicles are able to be scrapped and you receive some sort of incentive for doing so, whether that's a public transport pass or credits towards a cleaner car or a different type of vehicle like an e-bike," Genter said.

Currently, she said, "the scrappage scheme is in the hands of NZTA and we're expecting an update in the next month.

"It is, if it goes ahead, likely to be a trial in the first instance to work out what is the best way for this to be effective at both getting better outcomes for the quality of the fleet and also ensuring that low-income people are supported to transition to cleaner transport options."

One of the Government's aims is to find fair ways to support low-income households transition to cleaner transport options. Photo: Lynn Grieveson

The proposals

The documents released to Newsroom show 11 policies were investigated at various lengths by the Ministry of Transport. Among the suggestions that received only a cursory hearing were proposals that electric vehicle purchasers receive an upfront $1000 to $2000 subsidy or be exempted from paying GST.

The Ministry also briefly looked at varying annual vehicle licensing fees based on vehicles' CO2 emissions.

It is clear from a March 2018 briefing paper that the emissions standard and feebate scheme were the Ministry's chief proposals early on, but the import ban also received considerable attention.

In an April 2018 draft Cabinet paper, Genter proposed all three of these policies, as well as the scrappage scheme and a plan to examine cars for dangerous emissions as part of WOF tests.

While the import ban, emissions standard and feebate scheme would work to increase the number of low emissions and electric vehicles entering the fleet, the scrappage programme and testing would help phase out older, higher-emissions vehicles.

The WOF tests would not target greenhouse gases, which would be regulated by the emissions standard, but instead examine dangerous air pollutants like nitric oxide, nitrogen dioxide and fine particulates.

"Alongside improving air quality, this testing could also help encourage the faster exit of older high polluting vehicles from the fleet where the costs of repair outweigh the benefits of retaining the vehicle or selling it," Genter wrote in the draft paper.

Air pollutant testing came with drawbacks

However, the programme came with several major drawbacks. Financial costs on WOF test sites would be considerable, Genter acknowledged. "The key limitation for testing is the cost of the testing equipment, at approximately $12,000-$15,000 per device," she wrote.

"There are approximately 3,200 warrant of fitness agents in New Zealand, meaning that there would be considerable cost to businesses in requiring testing stations in the country to have emissions testing equipment."

"Although this is a significant short-term cost, it could be recovered over time through the charges for warrant of fitness and certificate of fitness tests. The increased cost per vehicle is likely to be in the order of $14-$16."

The scheme would also put an undue burden on low-income families, which are likely to have older and higher-polluting vehicles, according to an August 2019 cross-portfolio discussion document. "This could have a disproportionate impact on low-income households," the document stated.

"The initial investigation, the cost-benefit analysis undertaken by the Ministry of Transport, shows that the costs significantly outweighed the benefits, even taking into account the benefits of reduction of air pollution and carbon emissions," Genter told Newsroom. The Government decided not to go ahead with the programme.

Import ban still cost-effective

The same can't be said for the proposed ban on importing fossil fuel vehicles from 2035 onward. A preliminary Ministry cost-benefit analysis said that the plan would have a $2.26 billion net benefit and avert 27 million tonnes of CO2 emissions over 30 years.

"We should follow the lead of other countries by phasing out imports of petrol and diesel vehicles by 2035 or earlier" - Greenpeace

By comparison, the Government's feebate scheme is only expected to reduce emissions by 1.6 million tonnes over the next 20 years and the emissions standard could reduce emissions by 5.1 million tonnes for the same period.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson said that while the feebate scheme is "a logical first step ... it could go much further".

"We should follow the lead of other countries by phasing out imports of petrol and diesel vehicles by 2035 or earlier. New Zealand’s transport emissions have risen more than any other source since 1990 and are the main reason household emissions keep going up. It’s long past time that fuel efficiency regulations in New Zealand caught up to the rest of the world."

Genter said the Ministry's cost-benefit numbers were misleading, pointing out that the feebate estimate assumed the scheme only ran for five years. The emissions standard estimate posited that the standard remained the same, where other jurisdictions have consistently shifted their emissions standards downwards as their fleets have become cleaner.

"The evidence from overseas is that in countries with similar policies, that is what has reduced emissions the most of any policies," Genter said.

Moreover, New Zealand wasn't in a position to implement a legislated end-date, she said. "It's about giving people more choices. Obviously New Zealand isn't quite ready, given that we haven't had standards, to go as far as some of the other countries who have legislated an end-date to fossil fuel vehicles."

"I think just starting by getting standards is probably more realistic for us."

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