Scrapping subsidies during the financial crisis — Evidence from Europe

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Scrapping Subsidies during the Financial CrisisEvidence from EuropeNina Leheyda and Frank Verboven September 2013 AbstractWe study the e¤ects of the car scrapping subsidies in Europe during the …nancial crisis. We make use of a rich data set of all car models sold in nine European countries, observed at a monthly level during 2005-2011. We employ a di¤erence-in-di¤erences approach, exploiting the fact that di¤erent countries adopted their programs at di¤erent points in time. We …nd that the scrapping schemes played a strong role in stabilizing total car sales in 2009: they prevented a total car sales reduction of 17.4% in countries with schemes targeted to low emission vehicles, and they prevented a 14.8% sales reduction in countries with non-targeted schemes. In contrast, the scrapping schemes only had small environmental bene…ts: without the schemes, average fuel consumption of new purchased cars would have been only 1.3% higher in countries with targeted schemes and 0.5% higher in countries with non-targeted schemes. We do not …nd evidence of crowding out due to substitution from non-eligible to eligible cars in countries with targeted schemes. Finally, we identify some competitive and trade e¤ects from the schemes: domestic car producers bene…ted at the expense of foreign competitors in the countries where the schemes were not targeted.

Fiscal Policy and $$\hbox {CO}_{2}$$ CO 2 Emissions of New Passenger Cars in the EU

“…We do not have available data on the two separate markets and must leave this topic to future research. Third, we did not consider other fiscal measures such as the scrap subsidies which had major effects on sales in various countries, though the effects on the fuel efficiency is considered limited (Grigolon et al 2016).…”

What policies for greening the crisis response and economic recovery?

“…In the short run, the CARS programme helped maintaining employment in the car sector by preventing the sales of new vehicles to fall in the aftermath of the GFC. The programme provided rebates to 680 000 consumers (Li et al, 2013[36]), and led to roughly 500 000 purchases during the programme period (Green et al, 2016 [37]). The liquidity provided by the CARS programme was critical for generating this large response from consumers (Green et al, 2016 [37]).…”

“…The programme provided rebates to 680 000 consumers (Li et al, 2013[36]), and led to roughly 500 000 purchases during the programme period (Green et al, 2016 [37]). The liquidity provided by the CARS programme was critical for generating this large response from consumers (Green et al, 2016 [37]). However, the overall economic impact was muted by the fact that programme simply pulled 370 000 vehicle sales forward as opposed to generating additional vehicle sales (Mian and Sufi, 2012 [38]).…”

Perspectives on the Economics of the Environment in the Shadow of Coronavirus

“…These programs were introduced in many countries after the 2009 financial crisis and provided financial incentives to trade old, less fuel-efficient cars for new, more efficient ones. Empirical analyses have shown very mixed results regarding both the economic and the environmental stimulus effects of these measures (Grigolon et al 2016;Li et al 2013;Mian and Sufi 2012). At the beginning of every discussion about (green) recovery programmes, it is therefore important to develop transparent and sensible criteria based on which public aid should be allocated.…”