GLOBAL SUBSIDIES INITIATIVE

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Car-scrapping schemes: an effective economic rescue policy? (PDF - 1.86 MB)

Financial and economic turmoil and a global recession were common concerns in the aftermath of America's mortgage crisis. Following the German example, a large number of countries introduced "car-scrapping" schemes as part of their economic stimulus packages - policies which gave vehicle owners state money to trade in their old vehicles for new, more efficient ones.

This policy brief assesses the performance of car-scrapping schemes in Germany, Spain, France, the U.K. and the U.S., against their stated policy objectives:

1. to boost demand for the car industry and protect employment in that sector; and,
2. to reduce pollution, by incentivizing the purchase of cars with more efficient engines.

While politicians and car lobbyists praise the car-scrapping schemes as a success story, their outcomes are dubious.