The wreckage premium still is a topic of controversial debate. Almost two years after the completion a lot of data is available. Taking all effects into consideration the resulting image is multifaceted. All indicators show that the economical and ecological effects have been rather low. Positive effects have been temporary and only parts of the automotive industry took profit from the governmental support program in the scope of the Konjunkturpaket II. Other sectors, the used car market and independent workshops had to suffer from the negative effects of the wreckage premium. Although scrapping schemes were introduced all over Europe it remains questionable if the wreckage premium was a help to reduce the negative impact of the crisis. Maybe on a short-term perspective there was a positive effect. At the latest at the next tax increase it is worth considering if selective support programmes with a doubtful sustainability should increase national debts in the amount of 5 Billion Euros.
Table of Contents
1 Introduction/Problem Definition
2 Objectives
3 Methodology
4 Main Part
4.1 Wreckage premium: economic-political background
4.2 Wreckage premium: Facts and figures
4.3 Wreckage premium: An economical evaluation
4.4 Wreckage premium: An ecological evaluation
4.5 Wreckage premium: Other collateral effects
5 Conclusion
6 ITM Checklist
7 Bibliography
Objectives and Topics
This assignment evaluates the effectiveness of the German "wreckage premium" (Umweltprämie) implemented in 2009 as a response to the global economic crisis. It investigates whether this monetary incentive actually provided a sustainable economic stimulus or positive ecological impact, or if it merely acted as a short-term intervention with questionable long-term benefits.
- Economic-political background of the German wreckage premium.
- Evaluation of the incentive’s impact on the automotive industry and the used car market.
- Analysis of the ecological benefits versus the environmental costs of fleet renewal.
- Critical assessment of the "entrainment effect" on consumer demand.
- Comprehensive review of collateral effects and broader economic sustainability.
Excerpt from the book
4.4 Wreckage premium: An ecological evaluation
Did the wreckage premium deserve the official labeling as “Umweltprämie”?
According to report of the IFEU the average age of the vehicles scrapped was 14,4 years. This corresponds with the typical immobilization time of a used car in Germany. The fear of some opponents that 9 year old premium vehicles could be scrapped resulting in an inacceptable destruction of residual values didn´t turn out to be practice due to the high residual values of these vehicles (scrapping these cars would result in a substantial negative wreckage profit). The fuel consumption of the new cars was ~20% lower than of the replaced cars. This value is not very impressive but the result of the circumstance that fuel-efficient technology is compensated by higher average weights of new vehicles. The old car fleet emitted an average of 200 g CO2 while the new car fleet emits ~160g CO2 (IFEU 2009). This corresponds with a reduction of 1,7 l gasoline or 1,5 l Diesel per car/100km. The realized savings in CO2 emission is hardly 1% of the total amount emitted by cars in Germany. For an appropriate evaluation of these numbers it should be taken into account that roughly 10-20% of life-cycle emissions of a car are created during production and recycling. If the transport of parts is additionally taken into account this number rises to 25% (Spindler 2009). This energy invest is depreciated over the life-cycle of a car which is probably shortened by earlier scrapping.
Summary of Chapters
1 Introduction/Problem Definition: This chapter introduces the controversial nature of the wreckage premium and defines the scope of the study regarding its role in the 2009 economic crisis.
2 Objectives: This section outlines the core research questions, focusing on the background, facts, winners/losers, and the dual evaluation of the program from economic and ecological perspectives.
3 Methodology: It describes the research approach, which relies on an intensive review of existing literature and data, while acknowledging the inherent difficulties in interpreting conflicting expert conclusions.
4 Main Part: This comprehensive section analyzes the political motives, market statistics, economic consequences, environmental outcomes, and collateral damage of the incentive scheme.
5 Conclusion: The chapter synthesizes findings, arguing that the program had negligible environmental benefits and questionable economic sustainability, often resembling a "flash in the pan."
6 ITM Checklist: This section applies the findings to management disciplines, including strategic, marketing, and financial management perspectives.
7 Bibliography: This section lists the sources used for the assignment, covering government reports, economic analyses, and media articles.
Keywords
Wreckage premium, Umweltprämie, Economic crisis, Automotive industry, Fleet renewal, Entrainment effect, Ecological evaluation, GDP development, Scrapping scheme, Sustainability, Market distortion, Consumer behavior, Governmental debt, Residual value, Market intervention
Frequently Asked Questions
What is the core subject of this assignment?
The assignment examines the economic and ecological impact of the German "wreckage premium" (Umweltprämie) of 2009, introduced as a response to the global financial crisis.
What are the primary themes discussed?
The main themes include the automotive industry's market performance, the validity of the "environmental bonus" label, the concept of the entrainment effect, and the impact of the policy on governmental debt and various business sectors.
What is the main research goal?
The goal is to determine if the wreckage premium was a helpful, effective instrument to reduce the negative impact of the economic crisis on the German economy and environment.
Which methodology is employed?
The work utilizes an intensive literature research approach, analyzing available data from governmental institutions and expert economic studies to contrast different stakeholder perspectives.
What topics are covered in the main body?
The main body covers the political background, factual data on vehicle sales, economic evaluations of state expenditure versus benefits, ecological assessments of CO2 reduction, and secondary collateral effects like those on independent workshops.
Which keywords best describe this study?
Key terms include Wreckage premium, Automotive industry, Economic crisis, Fleet renewal, Sustainability, and Entrainment effect.
Why did the author conclude that the ecological effect was minimal?
The author notes that while new cars are more efficient, the savings were offset by the emissions created during the production of new vehicles and the shortening of the lifecycles of scrapped cars.
What is the "entrainment effect" mentioned in the text?
It refers to the phenomenon where 75% of car sales supported by the premium would have likely occurred anyway, meaning the policy failed to generate significant additional demand for the automotive sector.
How were independent workshops affected by the policy?
Independent workshops were identified as "losers" because they rely on repairing older vehicles, and the scheme accelerated the replacement of older cars, leading to a decrease in their revenues.
- Arbeit zitieren
- Holger Bodenmüller (Autor:in), 2011, An economic evaluation of the Wreckage Premium, München, GRIN Verlag, https://www.grin.com/document/271649
