Policies on end-of-life passenger cars in China: dynamic modeling and cost-benefit analysis

Abstract

The expansion of motor vehicle fleet in China during the past decade has produced a cascade of challenges, including dealing with end-of-life passenger cars. To date, these cars have not been effectively collected or recycled. Policies must be deliberately devised and reformed to facilitate state-of-the-art vehicle recycling and minimize waste arising from end-of-life cars. In this study, dynamic modeling and cost-benefit analysis have been employed to investigate how polices, including government subsidies, a value added tax and a deposit-refund system, may affect recycling of end-of-life passenger cars. The results indicate that a combination of deposits and subsidies will surpass all of the other independent policies in terms of the recycling rate. This combination is expected to lead to a recycling rate of 80% of end-of-life passenger cars by 2050. However, the government will have to pay an annual 62 billion Chinese Yuan in the middle of the century for old-for-new replacement subsidies, posing a heavy burden on public finance. Comparatively, the deposit-only scenario will cost the government 4.7 billion Chinese Yuan and elevate the recycling rate to 46% in 2050. These policies may help curb the black market and promote the legitimate business of dismantling and recycling in the long run. Moreover, the prospect of vehicle remanufacturing will play another key role in diminishing the black market. The results in China are compared with policies and practices in Europe, Japan and South Korea to help decision-makers develop the most appropriate strategies for end-of-life vehicle management.