Cash for Clunkers

July 28, 2009 -- Filed under Economy by Andrew Macdonald

The US government offers cash to stimulate growth in the efficient automobile sector.

The US Congress moved last week to encourage people to trade in and scrap old polluting cars. Using funds from the stimulus package approved in February, the government will provide up to $4,500 US for the purchase of a new efficient vehicle.

Negotiations on scrappage programs have been ongoing in most developed nations as part of proposed economic stimulus action. Back in March, Deloitte announced “This scrap bonus concept seems to be working and perhaps could be adopted in more markets.” According to Martin Hoelz, automotive industry leader for the Deloitte member firm in Germany, “It’s a simple but innovative idea which at least here in Germany is helping to stimulate demand. New car sales in Germany spiked 22 percent last month, bolstered partly due to the €2,500 (US$3,200) subsidy for people who turn in their old car and buy a new one.”

Will Canadians give a nod to the Federal government providing cash incentives for dramatic improvements to road efficiency?

Is Parliament talking about programs similar to those in the US and Germany? The Canadian Automobile Dealers Association is pushing for a new national scrappage program. On June 5, CADA held a very successful joint press conference with the Canadian Vehicle Manufacturers’ Association (CVMA) on Parliament Hill to discuss vehicle scrappage. The resulting media coverage was extensive, including:

Print/Online:

•    Financial Post
•    CBC.ca
•    Metro News
•    Canadian Press (which has been picked up in Winnipeg and Halifax, in various forms)
•    CFRA.ca
•    Richard Gauthier, President CADA, interviewed by 24 Hours
•    The Globe and Mail: “Auto makers, dealers urge Ottawa to pay buyers $3,500 to trade in old cars”

Radio:

•    CBC radio news had a piece in national rotation
•    There was also a Radio-Canada journalist at the press conference

Television:

•    CTV Toronto: “They expect a richer scrappage program would get up to 100,000 old cars off the road.”
•    Richard Gauthier spoke extensively with a Radio-Canada journalist after the press event
•    CPAC’s Friday night current affairs program

I wonder if a new Canadian program will include provisions for recycling all of these clunkers responsibly. Who will ensure that all donated cars are handled conscientiously while being properly recycled? Although almost all vehicles are recycled for steel at the end of their lives, hazardous materials that are not removed end up seeping into the ground, being released to the air, or leached into our water.

Provincial scrappage associations have focused on this issue and work with auto recyclers to ensure that materials such as oil, gasoline, refrigerants, mercury switches and tires are removed from the cars prior to scrappage. In addition, recyclers reuse any components of the vehicles that are safe to reclaim and that do not contribute to vehicle emissions, reducing the need for new raw materials in the manufacture of new parts.

We also have the opportunity to help nudge our auto recycling industry into the 21st century. A next step, and one that could be incorporated into a Canadian system, is dealing with auto fluff. Why recycle 87% of a vehicle when 98% is possible?

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