DTI consults on EC proposal on end-of-life vehicles

A consultation exercise to assess the implications of the draft EC Directive on end-of-life vehicles (ELVs) was initiated by the Department of Trade and Industry (DTI) on 2 February.1 The Government's initial estimate is that the Directive would cost the vehicle and allied industries £360-525 million per year when fully implemented - but the figure is subject to large uncertainties.

The draft Directive was finalised by the European Commission last summer (ENDS Report 270, pp 39-40 ) and published in November.2 Its main provisions would require each Member State to achieve an ELV reuse and recovery rate of 85% and a minimum reuse and recycling rate of 80% by January 2005. The targets would rise to 95% and 85%, respectively, by January 2015.

In the UK, where around 1.5 million vehicles are scrapped each year, the recovery rate is currently 75%. Last summer, motor manufacturers and trade associations for another four industries promised to pursue a target of 95% recovery by 2015 - although, in contrast to the EC proposal, they have not identified a separate reuse/recycling target.

The DTI's preliminary estimate of the recurring costs of the Directive are shown in the table below. These exclude the costs of vehicle redesign and coding of parts to comply with the Directive's requirements to ease dismantling and identification of parts for recovery. Non-recurring costs are estimated at close to £60 million - mainly on licensing and upgrading of vehicle dismantling operations.

The DTI acknowledges that its estimates are subject to considerable uncertainty. The largest element of the overall cost - reimbursement by the manufacturer of the last owner of a vehicle with a negative market value - is based on an industry estimate which assumes that £50 per car would have to be paid for half of all ELVs. Even so, such payments would amount to only £37.5 million per year at current scrappage rates. The remaining costs of £162.5-262.5 million would be incurred in checking the credentials of the last owner and other relevant data, indicating costs of £108-175 per vehicle.

Widely varying estimates of the cost of the Directive's requirements for annual compilation of data on recovery, reuse and recycling were provided by the vehicle manufacturing and dismantling industries. The former put the figure at £95 million on the basis that one employee costing £20,000 per year would be devoted to this task at each manufacturing and dismantling site. But the latter came in with the much lower figure of £30 million on the basis of estimates of the time taken to weigh and record each part removed from a vehicle.

The Directive's other major cost driver is its recovery and recycling targets. Here the DTI drew on Dutch data to estimate that the cost of removing an extra 30 kilograms of parts from each vehicle to meet the 2005 targets would amount to £17.48 per car, rising to £70.16 per car to remove the 80 kilograms needed to meet the 2015 targets. However, it is not clear whether these figures take account of the full net costs and benefits of reuse, recycling and recovery.

The Directive will have significant regulatory implications for vehicle dismantling businesses. At present, only about 1,800 of the estimated 4,700 dismantling sites are subject to waste management licensing. Another 2,000 are registered as exempt from licensing, while 900 are operating illegally. The Directive would require all dismantlers to be licensed, and this would entail estimated upgrading costs for the 900 illegal sites of £54 million.

The DTI has asked for views on about a dozen issues arising from the draft Directive. Fundamental questions are whether it is truly necessary on grounds of trade distortion and whether it conforms to the subsidiarity doctrine. The DTI has also invited views on the desirability of exemptions for small volume manufacturers and the application of the Directive to two- and three-wheeled vehicles.

Other major issues include the cost implications of free vehicle take-back; the form of a possible compulsory certificate of destruction scheme for ELVs; and the environmental justification for the recycling target.

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