The European Automobile Manufacturer's Association (ACEA) reports that passenger car sales in the first eleven months of 2009 show that car-scrapping schemes - programs in which vehicle owners are given money by the state to trade in old vehicles for new, more efficient ones - are a successful way to support car industries struggling in the recession.

As of November, the ACEA states that thirteen such schemes exist in EU countries, largely in Western Europe: Austria, Cyprus, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal, Romania, Slovakia, Spain and the UK. It has produced an overview summarizing the details of the programs in each country, including the grant paid per consumer, the age and engine-efficiency requirements for new-car purchase, the total money allocated to the scheme and its lifetime.

The ACEA argues that countries with a car-scrapping scheme often fared better than others, and recommends that, "all 27 EU Member States should adopt fleet renewal schemes to soften the current decline in motor vehicle sales". According to the ACEA, these programs boost the ailing industry, improve environmental and safety standards and reduce the resale of Western Europe's older, inefficient vehicles to consumers in Central and Eastern Europe. Three EU countries - Poland, the Czech Republic and Hungary - are said to be discussing the possibility of introducing their own programs in the future.

However, an analysis of car-scrapping schemes carried out for the Global Subsidies Initiative (GSI) and reported in a Policy Brief in December 2009 ("Car-scrapping schemes: an effective economic rescue policy?"), provides another perspective on these kinds of policies. Reviewing programs in Germany, Spain, France, the U.K. and the U.S., it concludes that, although such schemes may benefit the car industry, it is less clear how they affect a nation's economy overall or contribute to environmental goals.

In some cases, the majority of new vehicles being purchased are foreign brands, and car-scrapping schemes may encourage consumers to bring car-purchase decisions forward in time, simply shifting a decline in sales to a later date. Moreover, support programs can benefit the car industry at the expense of other economic sectors struggling in the recession. The GSI also argue that effects on the environment are demonstrated to be dependent on the design of the scheme in question. In Spain and France, for example, consumers only receive support if they purchase new cars with relatively stringent fuel-efficiency criteria. By contrast, consumers in Germany and the U.K. receive support regardless of the fuel-efficiency of the new vehicle purchased.

For more information about car-scrapping schemes in the European Union, see the ACEA's website.

The GSI's Policy Brief "Car-scrapping schemes: an effective economic rescue policy?" can be accessed here.