Abstract
In recent years, economic incentives to reduce the life length of automobiles have been proposed as a means to reduce vehicle emissions. The argument is that old cars often pollute more than new ones. " Accelerated scrappage programs" have also been implemented, in some European countries and in the USA. A "chain of replacement" model is used to examine the effects of automobile taxes and of a scrappage premium on the optimal life length of cars, and on the size of the car fleet, and the predictions of the model are tested on data on the scrappage of cars in Sweden 1989-1996. The theoretical model predicts that increased taxes on the purchase of cars should increase the life length of cars, and reduce the number of cars. A permanent scrappage premium would have the opposite effects. Changes in periodic taxes would have no effect on the life length of automobiles, but would reduce the size of the car stock. A temporary scrappage premium would lead to the scrappage of all cars worth less than the premium. These cars would immediately be replaced by new cars. The econometric analysis supports the conclusions from the model. It is concluded that both a temporary and a permanent scrappage premium would have ambiguous effects on emissions. Thus, it is questionable if such policies reduce vehicle emissions.