02 Jun 2020, 13:23
David Reay

Purchase premium scheme for all vehicles would cause rise in CO2 emissions – study

Clean Energy Wire / MDR

A government-backed purchase premium on all new vehicles bought in Germany would lead to a rise in CO2 emissions, according to a study by the International Council on Clean Transportation (ICCT). The research organisation found CO2 emissions would increase by 1 percent if a scheme covered all car types, but would fall by 62 percent if it targeted only battery-powered vehicles. If a subsidy program was limited to vehicles that meet the EU’s 2021 CO2 emissions target (110 g/km), a fall of 28 percent is expected.

The study coincided with a report by the ifo research institute that casts doubt on the economic benefits of scrappage schemes, whereby new car buyers receive a bonus in exchange for trading in their old vehicle. The subsidies lead to a short-term boost in sales but a substantial fall in the medium term. “Most studies give no indication that more cars are sold because of the premiums,” said study director Felix Rösel. He added that bonuses also cut demand in other industries as car buyers have less spare cash to spend elsewhere. The ifo said the environmental benefits of scrappage schemes were still unclear. Both the ifo and ICCT’s findings are based on bonus schemes deployed after the 2008/9 financial crisis.

The German government is expected to make an announcement on purchase premium schemes on June 2. The auto industry is lobbying hard for such subsidies to aid its recovery from the coronavirus crisis, but German economists and environmental groups are largely opposed or want targeted subsidies. They would prefer the government to focus on macroeconomic projects to boost the wider economy, and spend more on green mobility. A survey in May by the broadcaster MDR showed that 75 percent of Germans are against the state providing financial support to incentivise car sales.

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