Wednesday, 22 April 2009


Credit where it's due. The government's attempt to set price signals - through taxes and charges - to encourage environmentally beneficial behaviour is correct, if long overdue.

If we're to retain many of our freedoms but still take the environment seriously, we have to make sure the prices of things reflect the true price, which includes the cost to the environment. If a product or an activity has an environmental cost, that has to be paid for by the user - simple economics really. And we have to move towards a situation in which doing the right thing is also the cheapest and/or easiest thing.

But the idea that offering motorists £2000 to scrap an old vehicle and buy a new one is not, repeat not an environmental measure. Nor is the idea that it has been successful in Germany a comment that should go unchallenged.

It's not an environmental measure for two reasons. Firstly, around 20 per cent of the energy used by a car in its lifetime comes in its manufacture, a factor seldom taken into account when emissions from old vehicles are compared with emissions from new. There's also the waste problem of disposing of even larger numbers of used vehicles.

Secondly, much less progress has been made on emissions reduction than the car makers would have us believe. A study in 2008 showed a Volkswagen Beetle now is no more fuel-efficient than a Beetle made 60 years ago. The car makers held out scandalously against EU efforts to reduce carbon dioxide emissions from the average new car to 120g per kilometre, saying it was technically not feasible when several makers were already doing it! What they meant was that they make greater profits on the bigger gas guzzlers. Regrettably the Commission and member state governments fell for it.

The 'scrappage' payments in Germany (they offer €2500, very close to Alistair Darling's £2000) have been a success in terms of a massive take-up, so successful that the government has exhausted the money it put aside and has been forced to make more available. It's like a drug German car buyers have become addicted to in a very short space of time.

A central argument made in all this is that the car industry is central to our economic well-being. But it isn't! We have learned - for cost and environmental reasons - to treat electricity, gas, oil and other sources of energy as something we need to use as little as possible of. We should view transport the same way - some is needed, some is even desirable, but the sign of a well managed and efficient economy is that we use no more than is necessary.

Imagine offering state subsidies to encourage people to use more fuel than necessary to heat their homes - it would be laughed out of the political arena! So why is offering state subsidies to boost an industry whose dependence we should be weaning ourselves off any different?

These £2000 payments are like a financial methadone programme for addicted car makers.

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