Used Car Market and Heterogeneous Environmental Standards, from Developed to Developing countries

Details

Supervisors

Roman, Philippe ; Tom Georges, Schmitz

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale

Abstract

Between a worrying recurrence of pollution peaks, health alerts, and climatic disasters, our environment is deteriorating, in particular air quality. Formerly subject to localized pollution, essentially circumscribed to the first industrial basins, all the urbanized regions are today gangrened by air pollution. At the same time, the chemical composition of the atmosphere is changing fast and the ecosystems are undergoing transformations whose speed is unprecedented. What are the causes? What does the future promise? Motorized transports are currently omnipresent, omnipotent. According to the European Commission, "Air pollution remains the main environmental factor linked to preventable premature illness and death in the European Union and it still has significant negative effects on a large part of the natural environment". The OECD announces that the urban air pollution should become by 2050 the main environmental cause of death in the world, in front of unsafe water and lack of sanitation. For its part, the International Panel on Climate Change (IPCC) emphasizes that "global warming is unequivocal. Atmospheric (CO2) concentrations have increased to unprecedented levels since 800,000 years. This increase is firstly explained by the use of fossil fuels. Human influence on the climate system is clearly established. To limit climate change, it will be necessary to significantly and sustainably reduce greenhouse gas emissions". How is it that cars are constantly performing better, but that, collectively and globally, we fail to limit urban pollution and greenhouse gas emissions? What is the real contribution of cars to this degradation? How to explain the gap between the beneficial technical progress achieved on the theoretical level and the bad results observed in practice? Where would the complete renewal of car fleets take us if we equipped them with the latest technology? What measures should be taken at local, national and international levels to genuinely tackle the problem of air pollution by cars, those which would be capable of genuinely cleaning urban air and contributing in proportion to the stabilization of the climate? Over the years, the automobile has been seen as a symbol of freedom, individualism, growth, and as the pillar of modern society. The automotive market is indeed one of the most important economic sectors by revenue. This market represents cars selling, manufacturing, development, and is correlated to many others such as energy markets (Brent, WTI, siderurgy), road building, maintenance, repair shops. Cars represent a significant budget for most of the households. We buy or lease cars and then we must face their costs of functioning: petrol, diesel, electricity, taxes, insurance, maintenance. The automobile production process needs a huge quantity of energy, raw materials (metals, plastics, leather. . . ) and capital (humans and machines). During its lifetime, a car can change owners and continues to consume and pollute. Both production and utilization are potential sources of earnings and growth but also sources of pollution. In large urban areas, road transport has become the main source of pollution. There are more than 1.2 billion passenger cars in the world today. In 2019, more than 77 million passenger cars were made in a single year. In Western Europe, the number of cars increased by 130 percent in the past 40 years. There was a 100 percent increase in 20 years between 1980 and 2000. Now the rate of increase is lower, indicating that saturation is approaching, but trips are longer and more frequent. In developing economies, the rate of increase in the number of cars is often close to 10 percent annually, which means doubling every 7-8 years. It seems that by prolonging the production and consumption of automobiles as well as the infrastructures, we are gradually settling in a smoky and warmed tunnel which leads to a dead-end, which should be the signal of a necessary and abrupt turn. Technical "depollution" devices exist and are being developed more and more by manufacturers. However, we can only note a very low or inexistent impact of these technologies. Indeed, the air quality in most of the cities in developed and developing countries continues to deteriorate. Facing the general difficulty in tackling these issues, it is necessary to try to better understand the automotive market and its interactions in the world. What about the research subject of this thesis? This thesis will point out the car environmental standards heterogeneity across the world and its catastrophic results on the pollution mostly explained by the used car market. Throughout developing countries, the demand for cars is being stimulated. Many old, second-hand, and end-of-life cars are entering the market in low- and middle-income countries, causing serious consequences for public health and global warming. Economic growth has also inflated the demand for freight and transportation vehicles. In countries with economies in transition, the service life of a car is longer than its life in advanced economies. In national and global air pollution control and climate change mitigation strategies, people have neglected the constant flow of old, second-hand, and cheap vehicles from high-income countries to low-income countries in Africa, Asia, Latin America, and the Caribbean. This has led to a large accumulation of used cars in the import market, and these used cars do not solve air pollution, climate and other environmental impacts. These countries are becoming scrap sites for old cars from developed economies. Developed economies are able to cope with the ensuing problems of car switching in the domestic market, while poorer economies do not. Developing countries that do not have their own car manufacturing bases and strong environmental safeguards are most vulnerable to unregulated imports of used cars. We will first draw the history of the automobile and its impacts on the environment. We will bring out the transport paradox. We will then analyse the car market in developed countries which is changing fast and do not necessarily take good directions. The developed countries are indeed more controlled by environmental standards but we will see that new cars are controversial. Advanced economies are also becoming exporters of used and polluting cars. In developing countries, in contrast, environmental norms are heterogeneous and unorganised resulting in polluting car imports. We will explain these facts with an empirical view and secondly weight down our words in a theoretical way. We will see that the open trade between developed and developing countries plays a major role in meeting the mobility needs of developing countries (welfare gains) but this international trade has disastrous environmental consequences. My research focuses on the global flow of used cars explained by heterogeneous environmental standards and the impact of these cars on local health with an emphasis on air quality. Vehicles that meet the emission standards for export markets, if used in combination with clean fuels, may reduce the negative impacts of road transportation but it is not often the case, especially if these cars are not well maintained. Both the export market and the import market play a role in promoting the circulation of used cars. The international community, international organizations, and industry groups have raised but not yet solved the problem of second- hand cars. Understanding and solving the impacts of second-hand car trade on local pollutants, health, and global air emissions should be a priority. We will see that this kind of trade should be more homogeneously controlled and restricted. We will finally present the different frameworks on individual carbon quotas and hence introduce a new model on national motor vehicle quotas. Increasing the motor vehicle usage price seems to be the only solution to stop the destructive cycle of automobiles. Exploring and analysing the automobile markets is an opportunity to take a step back from the current environmental situation, to understand its origin, to learn from it, and to imagine a favourable outcome in the near future.