MANAGEMENT OF END-OF-LIFE VEHICLES: LESSONS LEARNED FROM EUROPE FOR THE NEW ZEALAND SITUATION

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1 MANAGEMENT OF END-OF-LIFE VEHICLES: LESSONS LEARNED FROM EUROPE FOR THE NEW ZEALAND SITUATION Sue Cassells Massey University, Palmerston North, New Zealand 1. Introduction Deregulation of the New Zealand motor vehicle industry, which began in late 1986, stimulated a considerable increase in the supply of motor vehicles, particularly used vehicles from Japan. As a result, the number of passenger cars in New Zealand s fleet increased 67 percent from 1.5 million in 1986 to 2.5 million by June Approximately 70 percent of incoming vehicles each year are used imports that are on average seven years old, consequently the New Zealand fleet is aging. The average age of vehicles on New Zealand roads increased from 9.8 years in 1998 to 11.8 years by These changes have prompted concern regarding the disposal of vehicles at the end of their useful life. Key disposal issues are the abandoning of end-of-life vehicles (ELVs) on public and private property, and for those vehicles brought in for recycling, there are environmental concerns regarding some of the current practices within the industry. Depollution of ELVs and environmentally sound practices by dismantling operations are not profitable activities, therefore the market will not ensure that they take place. Depollution entails the draining of operating fluids, removal of the battery, possibly an LPG tank, tyres, CFCs from airconditioning units, and the defusing of pyrotechnical devices such as air bags and seat-belt tensioners. This depollution requirement means that many ELVs are of negative value, with the cost of depollution of the vehicle being greater than the value of any parts and materials that can be removed for sale. The increasing number of vehicles entering the country, combined with poor management of ELVs will inevitably lead to an increase in the environmental costs to New Zealand from motor vehicle disposal. Western Europe leads the world in the management of its ELVs, therefore an assessment of the Western European approach to ELV disposal and to the abandoned vehicle problem is undertaken, to learn lessons that may be helpful to New Zealand policymakers. The European Union adopted the EU Directive (2000/53/EC) 2 on ELVs in September The ELV Directive embraces extended producer responsibility (EPR), with the free take-back of all ELVs by the automobile manufacturers and professional importers in each of the member states from The ELV Directive has set ELV reuse and recovery targets of 85 percent of a vehicle (by weight) by 2006, and 95 percent by While it is too early to measure the success of the EU-wide approach to motor vehicle disposal, observation can be made of the relative success of the approaches taken by different member states leading up to the implementation of the ELV Directive. For this four countries were chosen, the Netherlands, Germany, Sweden, and the United Kingdom. The Netherlands and Germany were chosen because they recycle most of the vehicles that remain within their borders, each taking a different approach to achieve this. Sweden was the first country to employ an economic instrument as a tool to induce correct disposal of ELVs, and has done so for thirty years. The United Kingdom has a serious problem with abandoned vehicles and with vehicles being 1 All figures sourced from the Transport Registry Centre, Land Transport New Zealand (TRC, LTNZ). 2 Henceforth referred to as the ELV Directive. 1

2 recycled which have not undergone depollution, therefore how it addresses these two problems is of interest to New Zealand. The paper proceeds as follows. Key issues that lead to the environmental costs resulting from New Zealand s motor vehicle disposal are outlined in Section Two. Discussed in Section Three are the factors that contribute to the abandoned vehicle problem. A brief examination of the policies and practices used in the four EU member states is presented in Section Four. The paper is concluded in Section Five with recommendations made to reduce the environmental impact from motor vehicle disposal in New Zealand. 2. Key Issues Regarding ELV Disposal in New Zealand The New Zealand automobile recycling industry is well established and ELVs enter the recycling system via automotive dismantlers, scrap metal recyclers or local authority collection sites. All ferrous and most nonferrous metals in ELVs are recovered for recycling, as are some tyres, used oil, and the majority of car batteries. 3 Approximately 75 percent of each ELV (by weight) entering the recycling system is recycled, however, there is no record of the number of vehicles being recycled. There is little organisation within the car dismantling industry and individual operators are not legally required to hold an operating licence specific to vehicle dismantling. Standards and practices regarding the removal and disposal of hazardous fluids, gases, and components from vehicles, are variable across the industry. Depollution is undertaken, but without adequate monitoring and enforcement, it is not carried out on all ELVs. As a result, hazardous substances enter the environment imposing an environmental burden. In New Zealand it is not a requirement that ELVs be recycled. Further, once deregistered, a vehicle may remain indefinitely on private property or may be abandoned, without penalty, on public property where they impose costs on society. Costs take the form of visual pollution, concentrations of heavy metals in the environment, the release of hazardous fluids and gases into the environment and when in rivers, disturbed water flows. A survey of New Zealand s local authorities revealed that more than 25,000 vehicles nationwide are abandoned on public property each year. This represents almost 20 percent of the annual number of light motor vehicles that are deregistered. Each year approximately 35 percent of abandoned vehicle owners are traced and costs recovered. The annual cost to ratepayers associated with abandoned vehicles is estimated at six million dollars per annum. This cost estimate includes handling, administrative and compliance costs but excludes environmental clean-up costs when recovering vehicles from places like rivers and coastline, or social costs resulting from environmental externalities. In addition, some vehicles dumped in rugged terrain are never retrieved, as it is too costly to do so. The majority of abandoned vehicles, however, eventually end up in the recycling system. 3. Factors that Contribute to Vehicle Abandonment There are two main factors that contribute to the abandoned vehicle problem in New Zealand. First, institutional practices are not enforced, and so vehicle owners evade their responsibility to ensure the safe disposal of vehicles. Second, there is no standard practice in New Zealand regarding the acceptance of ELVs into the recycling system. 3 Details of the New Zealand automobile recycling industry are given in Cassells (2004). 2

3 3.1 Lack of Enforcement of Institutional Practices To remove a vehicle from the Motor Vehicle Register the owner is required to surrender the registration plates to Land Transport New Zealand (LTNZ) and cancel the vehicle s registration. Just under half of the vehicles that are removed from the Motor Vehicle Register each year were unlicensed during the previous twelve months, so their registration is recorded as lapsed. 4 Because of the twelve-month lag, the last registered owner may no longer be the current owner of the vehicle and this makes the enforcement of regulations difficult. Vehicle registrations can lapse in two ways. Firstly, registrations lapse when CVL (which includes temporary exemption) is not enforced. The likelihood of enforced compliance and the size of the penalty are such that a number of New Zealand vehicle owners ignore all warnings, and neither relicense their vehicle nor cancel its registration. Secondly, registration will eventually lapse when a vehicle changes ownership without the buyer confirming the change of ownership. There is a disincentive for the buyer to confirm ownership because until this happens the vendor remains liable for vehicle licensing and for traffic offences. 3.2 Inconsistencies in the Acceptance of ELVs into the Recycling System ELVs entering the recycling system should undergo depollution, however, limited resources for enforcement does not ensure this. There is also no standard practice in New Zealand regarding the acceptance of an ELV of negative value into the recycling system. All seventythree local authorities on the New Zealand mainland were surveyed regarding their facilitation of ELV entry into the recycling system and all but one responded. Fifty-two of the seventythree local authorities provide a collection site and storage for ELVs destined for recycling, 5 usually located at the local landfill. Of the fifty-two local authorities with a collection site for ELVs, forty-seven responded to the questions regarding collection site costs and revealed a wide variation in the disposal charge imposed. Thirty-five local authorities charge a fee for the acceptance of ELVs that have already undergone depollution. For ELVs that have not undergone depollution, information is provided in Table 1 regarding the cost to leave such a vehicle, relative to the 2002/2003 costs of depollution. Table 1: Local Authority (LA) Levies (Relative to Cost of Depollution) Charged for ELVs, beginning 2003 Levy for a vehicle that has not undergone depollution No. of LAs Free-of-charge 6 Levy, less than the cost of depollution 6 Levy, equal to the cost of depollution a 17 Levy, more than the cost of depollution 14 Not accepted at collection site 4 a The estimated average cost of depollution is $40 for a vehicle with air-conditioning and $18 for one without (2002/2003 prices, inclusive of GST). Therefore, in this table the cost of depollution is $18-$40. More often the levy was at the lower end of this range, which is expected, as the majority of ELVs did not have air-conditioning. As shown in Table 1, six local authorities do not impose a fee on accepting vehicles that have not undergone depollution, and these local authorities do not have large numbers of 4 In 2001, 2002, 2003 and 2004 this figure was 49 percent, 46 percent, 43 percent and 43.5 percent, respectively (Source: TRC, LTNZ) 5 Five city councils are located close to one of the metal shredding operations, making a collection site unnecessary. 3

4 abandoned vehicles to deal with. 6 A further six charge a fee that is less than the cost of depollution, which means that twelve local authorities (nearly one-quarter of those responding on this issue) subsidise the depollution of ELVs. This cost is borne by ratepayers. For vehicles that have not undergone depollution, seventeen collection sites charge a fee within the range of the cost of depollution. Four local authority collection sites do not accept vehicles that have not undergone depollution and fourteen others charge a fee that is greater than the cost of depollution. These factors contribute to a situation where New Zealand continues to have a problem with abandoned vehicles. Can New Zealand policymakers learn from experiences gained in Europe regarding motor vehicle disposal? ELV management in four Western European countries is examined in the following section. 4. Policies and Practices used in ELV Management in the Netherlands, Germany, Sweden and the United Kingdom Prior to the ELV Directive, which requires member states to adopt a unified approach to the management of ELVs, the Netherlands, Germany, Sweden and the United Kingdom have taken different approaches to ELV management, resulting in different outcomes. Their key policies regarding automobile recycling are presented in Table 2. Table 2: Policies used that impact on the automobile recycling industry Policy or approach taken Countries using this policy/approach Free take-back of ELVs Netherlands (1995), Sweden (2001) a Disposal premium (or refund) to ELV owner Sweden (1976) b Free market approach for the automobile Germany, United Kingdom c recycling industry (including ELV take-back) Subsidised recycling Netherlands (1995), Sweden (1976) Recycling quantity targets Netherlands (1995), Sweden, Germany Quantity of recycling achieved early % United Kingdom 81 85% Germany, Sweden 86% Netherlands Mandatory, enforced depollution of ELVs Sweden (1975), Netherlands (1995), Germany (1998) Auto dismantlers authorised and monitored Sweden (1975), Netherlands (1995), Germany (1998) a Sweden implemented EPR in 1998 whereby car manufacturers and importers provide free take-back of vehicles manufactured or imported into Sweden from 1998 onwards ([Sweden] Ordinance on Producer Responsibility for Vehicles, 1997). b This refund needs qualifying as the last owner was still required to pay for the vehicle s disposal out of that refund (where it was of negative value), up until July 2001 when the refund was increased to cover disposal costs for those ELVs not covered by EPR. c From late 2004, London councils offered free take-back of ELVs ([United Kingdom] epolitix.com, 2004). In the Netherlands motor vehicle importers and manufacturers have been successfully funding both the free take-back of all ELVs and an increased level of motor vehicle recycling since 1995 (Auto Recycling Nederland BV (ARN), 2003). Importers and manufacturers on first registration in the Netherlands of any new or used vehicle pay a mandatory product charge or waste disposal fee. The fee is used to subsidise the automobile recycling industry by paying recycling premiums for those dismantling operations and recycling activities that are not yet 6 It is difficult to make a direct comparison of the number of abandoned vehicles in areas where ELVs that have not undergone depollution are charged a levy, as compared with areas where there is no charge, as the demographics of the cities and districts vary widely. 4

5 profitable (this includes depollution of the vehicle). 7 Since the inception of the scheme, the level of recycling has increased, while the waste disposal fee has been reduced. 8 The recycling target of 86 percent of a vehicle (by weight) was achieved before the end of 1997 (ARN, 2003), and has continued to be the level of recycling attained (ARN, 2004). German automobile manufacturers have taken some responsibility for the disposal of their product, prioritising product design optimised for recycling. In addition, an extensive infrastructure for ELV acceptance and recycling is in place with manufacturers and importers holding individual contracts with collection centres, car dismantlers, recyclers and some of the large steel companies. Approximately 15,000 authorised collection centres are available to ELV owners nationwide (ARGE-Altauto, 2000). Free take-back of ELVs will be implemented by 2007 in accordance with the ELV Directive (ACEA, 2004). Germany and the United Kingdom have maintained a free-market approach to their automobile recycling industries, requiring the owner of an ELV of negative value to pay for the vehicle s disposal. If, however, it is reasonably easy to illegally dispose of an ELV, the user-pays approach to disposal may not be the best solution, as non-compliance could induce a significant social cost. Where there is a user-pays approach to disposal, evidence from Germany shows that to avoid vehicle abandonment requires the implementation of clear laws regarding vehicle ownership, licensing, and disposal, with penalties high enough to deter illegal behaviour, and the resources to enforce them. In the United Kingdom where strict enforcement does not occur, an estimated 1.5 million unlicensed vehicles are either in use on the roads or have been abandoned ([United Kingdom] Department for Transport, 2003). A deposit-refund system can be used to stimulate recycling, environmentally sound disposal, and a reduction in dumping, but can be costly to operate and may impose a net cost on society (United States Environmental Protection Agency, 2001; Barde, 1995). Furthermore, a deposit-refund does not address the issue of who pays for the good s disposal. An upfront motor vehicle disposal charge and a downstream refund have operated in Sweden since 1975 and 1976 respectively, and were introduced to address the abandoned vehicle problem ([Sweden] Motor Vehicle Scrapping Act, 1975). For ELVs of negative value, however, the owner had to pay the cost of the vehicle s disposal out of the refund received, and in some years the owner became a net payer for the ELV s disposal (BIL Sweden, 2002; [Sweden] Ordinance on Producer Responsibility for Vehicles, 1997). In addition, the real value of the refund in Sweden was severely eroded over the years. 9 These two factors may explain the continued existence of abandoned vehicles. Lindhqvist (2001) questions the efficiency of Sweden s economic instrument used as a policy tool to change behaviour. He argues that because the Government sets the level of both the refund and the disposal charge, there is no mechanism (other than the political one) to keep the refund to the minimum level required. The continuance of Sweden s car scrapping fund system is now under review (ACEA, 2005). Mandatory depollution of all ELVs and recycling or disposal of hazardous substances ensures minimal environmental impact from ELV disposal. To be enforceable, pollution abatement must be preferred over the risk and cost of noncompliance (Barde, 1995). In Germany, 7 The fee is set and administered by an independent organisation, Auto Recycling Nederlands BV (ARN) which was set up by the automobile industry, namely the manufacturers, importers and the recycling industry.. 8 In 1995 the fee was set at NLG250 (113.45). It was reduced to NLG150 (68.07) for the years 1998 to 2000, and to 45 in 2001, where it will remain until 2006 (ARN, 2004). 9 Prior to the first increase of the refund in 1988, the real value of the refund had fallen by 60 percent, and it was only 42 percent of its original value just prior to the second increase in Refund figures sourced from BIL Sweden (2002). 5

6 Sweden, and the Netherlands, depollution of ELVs is mandatory and automobile dismantlers must have authorised, monitored treatment facilities ([Germany] Ordinance on used motor vehicles, 1997; [Sweden] Motor Vehicle Scrapping Ordinance, 1975; ARN, 2001). Monitoring is stringent in Germany and the Netherlands, however, Zoboli et al. (2000) reported that in Sweden the authorisation procedure was loose and many facilities did not comply with the regulations. In the United Kingdom without enforced mandatory depollution of ELVs, the British Metals Recycling Association said that less than 1 percent of recycled ELVs had undergone depollution ([United Kingdom] Select Committee on Trade and Industry, 2001). Regulations and practices concerning vehicle licensing, ownership and disposal are presented in Table 3. Table 3: Institutional practices concerning vehicle licensing, ownership and disposal Institutional practice Licence fee Road usage tax Licence fee Ownership tax CVL enforced Dual notification change-of-ownership the responsibility of the vendor Certificate of Disposal required when deregistering a vehicle Enforced penalty for abandoning a vehicle Subsidised disposal of abandoned vehicles Countries using this practice Germany, Sweden, United Kingdom Netherlands Netherlands (no exemption), Germany (exemption finite & enforced) United Kingdom (1997), Sweden Sweden (1975), Netherlands (1995), Germany (1998) Germany, Netherlands Sweden (1976) directly from the Vehicle Disposal Fund and indirectly from local authorities United Kingdom indirectly from local authorities As shown in Table 3 Germany, Sweden, and the United Kingdom have a motor vehicle licence fee that is essentially a road usage tax, allowing vehicles to be granted an exemption from licensing when they are temporarily off the roads. In contrast, annual motor vehicle licence fees in the Netherlands are for vehicle ownership rather than road usage, so that a vehicle must always have a current licence until a Certificate of Disposal is presented and the vehicle is removed from the motor vehicle register. Licensing is stringently enforced in Germany and the Netherlands. Inadequate enforcement in Sweden and the United Kingdom has meant that unlicensed vehicles can be found on the roads. In the United Kingdom more than one million cars on the roads are uninsured and untaxed for longer than three months. To address the problem, as of 2004, any vehicle owner failing to renew the licence upon expiry faces an instant fine, not conditional on being observed on the roads ([United Kingdom] Department for Transport, 2003). In Sweden, Germany, and the Netherlands a Certificate of Disposal is required when deregistering a vehicle, in order to be absolved from any further fiscal responsibility for that vehicle. This is strictly enforced in both Germany and the Netherlands, but not in Sweden. In Sweden, however, there is the additional incentive of the refund when deregistering and disposing of a vehicle. The policies and practices presented in this section provide a basis for policy considerations to improve the management of motor vehicle disposal in New Zealand. These will be discussed in Section Five and recommendations made. 6

7 5. Recommendations for the Management of ELVs in New Zealand Current motor vehicle disposal practices in New Zealand give rise to environmental externalities. Four steps are recommended to reduce these externalities. First, reduce the number of ELVs being abandoned, second, encourage a greater number of ELVs into the recycling system, third, ensure depollution is undertaken on each ELV entering the recycling system, and fourth, encourage best practice among dismantlers in handling and disposing of hazardous substances. In Table 4 (on the page following), a summary of current practices and problems associated with the management of ELVs is presented, along with some recommendations. These target three areas; legislation and institutional practices, entry into the recycling system, and the environmental impact from the dismantling operation. 5.1 Legislation and institutional practices Evidence from the four European countries studied shows that enforcement of CVL, changeof-ownership notification, and fiscal responsibility for a vehicle are prerequisites to reducing the number of abandoned vehicles. New Zealand local authorities can only prosecute for abandoning a vehicle under the Litter Act (1979), but this seldom occurs. Therefore it is recommended that abandoning a vehicle be made an offence subject to an automatic infringement. Further, in order to remove the loophole that allows the last registered owner to claim that s/he no longer owns the vehicle and so evade liability, liability for an abandoned vehicle should be with the last registered owner not merely the owner (Local Government Amendment Act (No. 3), 1992). Continuous vehicle licensing (CVL) should be enforced. To this end, it is recommended that when a licence has been overdue for two months (and a one-month reminder notice has been ignored) an automatic infringement equal to the on-road infringement be issued, irrespective of whether the vehicle has been observed on the road. 10 With the current change-ofownership procedure, the buyer who has responsibility for confirmation of change-ofownership has a disincentive to do so, therefore it is recommended that the confirmation process (including the transaction fee) become the responsibility of the seller who has the incentive to transfer fiscal responsibility for the vehicle to the buyer. In order to encourage the recycling of all ELVs it is recommended that a Certificate of Disposal be introduced. This certificate would be issued when a vehicle is handed in for recycling. To be released from all further responsibility for a vehicle, the registered owner would be required to deregister the vehicle, a process conditional on presentation of the Certificate of Disposal and the vehicle s registration plates. 5.2 Entry of ELVs into the recycling system The acceptance of ELVs free-of-charge into the recycling system reduces the incentive to abandon a vehicle. 11 Since the processing of an ELV of negative value is not costless, freeof-charge acceptance of ELVs for recycling implies that another party must cover the cost of depollution. Extended producer responsibility (EPR) as a response to waste management, is gaining popularity, particularly in Europe, Japan and Korea. EPR asserts that a producer is responsible for the environmental burden of his/her product throughout its life cycle, from the choice of materials, the production process, through to downstream impacts from the use and disposal of the product, providing incentive to design with the entire life cycle in mind 10 Currently an unlicensed vehicle only incurs a fine if it is caught in use on the roads. To have an automatic fine imposed immediately the licence has expired (as is now the case in the United Kingdom) is confrontational in style, and likely to be counterproductive in New Zealand. 11 Data provided by New Zealand LAs offering free-acceptance amnesty periods for ELVs supports this. 7

8 Table 4: Motor Vehicle Licensing and Disposal: Current Practices, Problems and Recommendations Areas of Concern Current practices Current problems Recommended Solutions Vehicle licensing CVL a with temporary exemption. Not enforced. Registration lapsed if overdue 12 months. Fine of $200 if vehicle caught on roads without licence. >80,000 annual infringements issued for vehicles on road without licence. Data gap. Fines often waived, as ownership uncertain. CVL (including exemption) enforced: Licence overdue 2 months, automatic infringement equal to the on-road infringement. Flag owner s name on register, owner required to pay debt before relicensing another vehicle. Vehicle change of ownership Separate notification from both seller & buyer direct to LTNZ b. Buyer confirms & pays fee. Some vehicle ownership never confirmed. Data gap. Single dual notification form only (public to public sale), with seller responsible for notification & fee. Ownership change involving car dealers, done on-line. ELV disposal Disposal is choice of ELV c owner. No proof of whereabouts required. Plates surrendered to cancel registration. Destination of ELVs uncertain. Percentage ELVs recycled, unknown. Environmental externalities. Owner presents Certificate of Disposal from LA d or dismantler, plus plates, to cancel vehicle registration. Otherwise, fiscal responsibility remains with owner. Abandoned vehicles Not a specific offence. LAs responsible for abandoned vehicles. Lengthy notification period. 20% of ELVs removed from Motor Vehicle Register are abandoned. Cost to LAs, more than $6 million/year. Environmental externalities. Abandoning a vehicle, made an offence & subject to automatic infringement. Notification period reduced; enforce fiscal responsibility of last registered owner. Accessibility of ELVs into recycling system Via auto dismantlers & LA collection sites. No standard practice for acceptance. Some LAs charge more than cost of depollution, others subsidise ELV disposal. Not all ELVs brought in for recycling. Incentive to dump ELVs. Externalities resulting. LAs & dismantlers to accept ELVs free-of-charge. Depollution costs covered by first NZ owner when vehicle registered in NZ (into Vehicle Disposal Fund). Dismantler claims from Fund for depollution of ELV. Depollution standards Dismantling practices No operating licence for dismantlers. Monitoring by LAs & regional authorities. Inconsistent monitoring of disposal of hazardous fluids, due to limited resources. Percentage of ELVs undergoing depollution is unknown. Some practices result in environmental degradation. Mandatory depollution for ELVs. Industry to educate dismantlers on compliance re removal & disposal of hazardous fluids, then license & monitor dismantlers (cost added to disposal charge). Recycling Market forces 75% of ELV (by weight). No change. ASR disposal Component disposal To landfill. Some components to landfill. Possible limited landfill contamination. Environmental degradation. No change (ASR to landfill). Prohibit landfill disposal of lead-acid batteries, hazardous fluids, whole tyres & ELVs. a Continuous vehicle licensing b Land Transport New Zealand c End-of-life vehicle d Local authority 8

9 (Davis, 2000; Lindhqvist, 2000). Tojo (2004) identifies three immediate outcomes of adopting EPR, namely upstream design changes, advancement of downstream infrastructure and interaction between the two sets of players. In addition she observes ways in which producers implement their product disposal, comparing the individual with the collective approach. Tojo found that the greater the control producers have over the downstream infrastructure, the greater the inducement to make upstream changes. In New Zealand there is no domestic motor vehicle manufacture and most importers are not contracted by, nor affiliated to the vehicle manufacturers. The New Zealand Motor Vehicle Sales Act (2003), requires that a person importing more than three vehicles in a year be declared a motor vehicle trader. 12 This has led to a proliferation of vehicle importers. Should the principle of EPR be applied to motor vehicles in New Zealand, that is, should responsibility of disposal rest with the many unaffiliated importers? If the answer to this is yes, consider Tojo s (2004) three immediate outcomes. A small independent importer has no control over upstream design changes and at best might act as an intermediary for communication between upstream and downstream players. Therefore the only feasible outcome for the small importer is the development of downstream infrastructure, which would have to be undertaken collectively (less effective in terms of EPR outcomes, according to Tojo (2004)). Not only are most importers unaffiliated, they also import vehicles of different brands and ages. Therefore, if importers today are held responsible for the future disposal of these vehicles, administrative requirements for record keeping could be great and the likelihood of them still operating as vehicle importers, uncertain. In addition, it would pose the question of who would be responsible for the 2.5 million vehicles currently on the roads. Alternatively, if it were suggested that importers today pay for the disposal of vehicles becoming ELVs today based on market share, there would be issues of equity. 13 Tojo (2004, p.286) says the very rationale for the extension of responsibility to the producers is their capability to prevent problems at source. For these reasons EPR is not the preferred option for motor vehicle disposal in New Zealand. As an alternative, it is recommended that a depollution charge on incoming vehicles to New Zealand be imposed to cover the cost of ELV depollution. This is administratively more practical than EPR as the charge could be included in the initial vehicle registration fee paid by the first owner in New Zealand. The proposal is that the charge be equal to the current cost of depollution 14 and that the charges collected from this year s incoming vehicles pay for the depollution of next year s ELVs, 15 addressing the disposal cost of the current vehicle fleet. It is advocated that delivery of an ELV into the recycling system be the responsibility of the ELV owner. This would standardise the practice and cost of motor vehicle disposal throughout New Zealand. 12 The Motor Vehicle Traders Register does not differentiate between importers and sellers so that no figure could be given of the number of motor vehicle importers in New Zealand. 13 Many of today s vehicles may have been orphaned. In addition importers importing new vehicles have a greater profit margin per vehicle while being faced with the same cost per vehicle for ELV disposal ELV depollution costs range from $NZ36 to $NZ90, where the higher cost includes treatment of air conditioning and air bags. The dismantling industry is a competitive industry with many small labour-intensive operations. There is not the opportunity to realise economies of scale therefore, it is not unreasonable to assume that the marginal cost of carrying out depollution on the next ELV is similar to the average cost. 15 In 2003 there were 227,425 new registrations, while 132,085 cars had their registrations cancelled in If all cars with cancelled registrations became ELVs, all had air conditioning and airbags and were recycled, administration costs could be as high as 70 percent and still be covered. For administrative purposes the automotive dismantler carrying out the depollution would retain a duplicate copy of the Certificate of Disposal s/he issued in order to claim reimbursement for the depollution undertaken. 9

10 5.3 Reducing the environmental impact from the automobile dismantling industry While many New Zealand automobile dismantlers employ sound management practices, others do not. Experiences in Sweden and the United Kingdom demonstrate that without adequate enforcement, regulations and standards are ineffective. Therefore, it is recommended that depollution of all ELVs entering the recycling industry become mandatory and that automotive dismantlers be licensed and monitored from within the industry. 16 Another consideration is the imposition of recycling rates. The recyclability of the motor vehicle is determined by design decisions and material selection which are ever changing to meet demand for increased safety, reliability, fuel efficiency and more recently recycling. In light of these and also the variations in vehicle lifetime, van Schaik and Reuter (2004) question the imposition of a single-value recycling rate (using a static approach) as calculated by the International Organisation for Standardisation (ISO) norm and legislated for in the ELV Directive. It is also suggested by Bandivadekar et al. (2004) that the recycling target of 95 percent of an ELV by 2015, supported in the EU and in Japan, is unattainable. Should New Zealand increase the level of ELV recycling achieved in order to reduce the environmental impact from the recycling industry? Since ELV recycling in New Zealand is market-driven, if the government were to set recycling targets above the levels achieved by the market, this would require subsidising that additional recycling. The availability of markets for recovered materials and stability in supply and demand are crucial for the success of a policy to increase recycling levels (Sturges, 2003). New Zealand, with its small population base has a limited market for recyclables. In addition its physical isolation means that transportation of recycled materials to foreign markets is costly and while it is viable for nonferrous and precious metals, it is not for many other secondary materials. If an increased level of recycling was required, evidence from Europe suggests that this would result primarily in the recycling of glass (already oversupplied to the recycling industry), 17 plastics, and seat foam which constitute much of the automobile shredder residual (ASR) that currently enters the landfill. As inert materials, their biggest cost is the landfill space they use. Landfill space is not scarce and the landfill that receives most of the country s ASR uses the methane emitted for electricity production. Therefore, the cost to establish and subsidise markets for these additional recycled materials is likely to exceed any environmental gain. 18 The increasing number of used imports from Japan has made cars more affordable in New Zealand, however, it is necessary to ensure that the eventual disposal of these vehicles does not impose an environmental cost on New Zealand society. The above recommendations have arisen from an assessment of the experiences of Germany, the Netherlands, Sweden and the United Kingdom regarding ELV management. These include the consistent enforcement of a standardised system for the acceptance and handling of ELVs for disposal, and a change in incentives to induce private individuals and automotive dismantlers to change their behaviour. The efficient and comprehensive implementation of these recommendations will reduce the environmental impact of ELV disposal in New Zealand. 16 Where LAs provide collection sites, these need a depollution area of the same standard as that required by dismantlers. 17 At the beginning of 2005, ACI Glass, producing 99 percent of New Zealand s recycled glass, reduced the price it pays for all recovered glass from $92 to $75 per tonne (a fall of 18.5 percent) and for clear glass a further reduction to $10 per tonne (a total price fall of 89 percent) from 1 May Reasons cited were market changes in the price of recycled glass compared with raw materials and the continuing excess of supply, only some of which is exported to Australia (New Zealand Government Press Release 26 May, 2005). 18 This is supported by the findings of the Life-Cycle Assessment (LCA) carried out by Sweden s ECRIS project, that to raise the level of recycling of an ELV from 75 percent to 85 percent reduced the overall environmental impact from the recycling phase by only 2 percent (ECRIS, 1998). 10

11 References ACEA. (2004), Country Report Charts, Available: (Accessed: 2005, August 2). ACEA. (2005), EU 15 - Economic Report February 2005, Available: (Accessed: 2005, August 2). ARGE-Altauto. (2000), Arbeitsgemeinschaft Altauto 1st Monitoring Report, Available: (English version) (Accessed: 2002, September 8). Auto Recycling Nederland BV (ARN). (2003), Auto Recycling Nederland Environmental Report ARN BV, Amsterdam. Auto Recycling Nederland BV (ARN). (2004), Results, Available: (Accessed: 2005, April 21). Bandivadekar, A. P., Kumar, V., Gunter, K. L., and Sutherland, J. W. (2004), A Model for Material Flows and Economic Exchanges within the U.S. Automotive Life Cycle Chain. Journal of Manufacturing Systems, 23(1), pp Barde, J-P. (1995), Environmental policy and policy instruments in: H. Folmer, H. Gabel and H. Opschoor (eds) Principles of Environmental and Resource Economics: A Guide for Students and Decision-Makers. Edward Elgar Publishing Limited, Aldershot, Hampshire, pp BIL Sweden. (2002), End-of-life vehicles, Sweden. Unpublished report, BIL Sweden (October). Cassells, S. (2004), Toward Sound Management of End-of-Life Vehicles in New Zealand. PhD. Diss., Massey University, Palmerston North. Davis, G. (2000), Principles for Application of Extended Producer Responsibility in: OECD Joint Workshop on Extended Producer Responsibility and Waste Minimisation Policy in Support of Environmental Sustainability, Part 1: Extended Producer Responsibility, Paris, 4-7 May OECD, Paris, pp ECRIS. (1998), ECRIS a research project in environmental car recycling ECRIS Report No. 98:17, ECRIS, Sweden. EU Directive 2000/53/EC. (2000), Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of-life vehicles. Official Journal of the European Communities L269, [Germany] Ordinance on used motor vehicles. (1997), Ordinance on the transfer and ecologically compatible disposal of used motor vehicles (Ordinance on used motor vehicles). German Bundestag Publication 13/7780 (May). Lindhqvist, T. (2000), Extended Producer Responsibility in Cleaner Production: Policy Principle to Promote Environmental Improvements of Product Systems. PhD. Diss. 11

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