Role of Motor Vehicle Lifetime Extension in Climate Change Policy

Vehicle replacement schemes such as the cash for clunkers program in the U.S. and the scrappage scheme in the UK have featured prominently in the economic stimulation packages initiated by many governments to cope with the global economic crisis. While these schemes were designed as economic instruments to support the vehicle production industry, governments have also claimed that these programs have environmental benefits such as reducing CO2 emissions by bringing more fuel-efficient vehicles onto the roads. However, little evidence is available to support this claim as current energy and environmental accounting models are inadequate for comprehensively capturing the economic and environmental trade-offs associated with change's in product life and product use. We therefore developed a new dynamic model to quantify the carbon emissions due to changes in product life and consumer behavior related to product use. Based on a case study of Japanese vehicle use during the 1990-2000 period, we found that extending, not shortening, the lifetime of a vehicle helps to reduce life-cycle CO2 emissions throughout the supply chain. Empirical results also revealed that even if the fuel economy of less fuel-efficient ordinary passenger vehicles were improved to levels comparable with those of the best available technology, i.e. hybrid passenger cars currently being produced in Japan, total CO2 emissions would decrease by only 0.2%. On the other hand, we also find that extending the lifetime of a vehicle contributed to a moderate increase in emissions of health-relevant air pollutants (NOx, HC, and CO) during the use phase. From the results, this study concludes that the effects of global warming and air pollution can be somewhat moderated and that these problems can be addressed through specific policy instruments directed at increasing the market for hybrid cars as well as extending lifetime of automobiles, which is contrary to the current wisdom.