Remanufacture, refurbishment, reuse and recycling of vehicles: trends and opportunities

9. Potential policy actions

This section describes a number of potential policy actions which could be considered in support of the short, medium and long term opportunities identified in the previous two sections.

Section 9.1 describes potential policy actions to disseminate knowledge about the opportunities identified (from this and potential future studies). These actions also include further engagement with the current and potential future supply chain.

Section 9.2 describes potential policy actions which could be taken to support the medium and long term opportunities. These actions focus on the broad objective of supporting the development of the circular economy.

Sections 9.3 to 9.7 describe a range of potential policy actions to address short term opportunities. These include:

• Awareness raising amongst ATFs regarding compliance with depollution processes
• Enabling measures to support reuse of vehicle parts and components
• Funding for study into shredder residue recycling plant
• Other measures to improve the level of recycling and quality of output material
• Investigate the reuse and recycling of high value metals and rare earth elements

When considering these potential policy actions it is useful to do so in the context of the waste hierarchy.

The Waste Hierarchy ^[108]

When discussing potential policy actions it is useful to consider how the action might impact on moving material up the waste hierarchy from disposal through to reduction.

Each of the above potential policy actions is now considered in turn.

There is a need to disseminate information about the potential short, medium and long term opportunities to: companies operating in the ELV dismantling and shredding sector; government and regulatory representatives; vehicle producers and suppliers; companies currently involved in refurbishment and remanufacture of vehicle parts; potential new entrants into the remanufacture of mechatronic parts and; academics and researchers with relevant expertise.

This dissemination could be carried out via presentations at events, through specialist print and online publications, through specific supply chain workshops, etc. Dissemination through a workshop of supply chain representatives would also the opportunity to identify areas for future studies, research etc.

In the short to medium term consideration should be given to the following potential policy actions:

Both sector and government representatives should work closely with the Technology Strategy Board ( TSB) on any follow up funding support to the recently closed call for feasibility studies (Resource efficiency: New designs for a circular economy ^[109] ). This would help identify the focus of future TSB funding in this area and whether any Scottish based companies had applied for funding during previous calls.

This potential action should be linked with the previously mentioned workshop of supply chain representatives to test whether any potential research projects might be pursued with funding support from the TSB.

Work with existing expertise within Scottish (and other) universities, automotive manufacturers/remanufacturers and other companies, to scope a 'Centre of Remanufacturing Excellence'. This could provide a focus to identify and overcome issues and develop opportunities in Scotland. Potential services could include company capability development support, training development, certification support, circular design support, industry led R&D (technical and business model), environmental assessments, policy support, etc.

Investigate the creation of innovation and R&D hubs to support the development of a circular economy - identifying technical and non-technical barriers and addressing via interdisciplinary teams.

Promote clear standards for the activities which can be classed as remanufacturing (potentially based on BS 887-220:2010, which is in the process of being developed to an ISO standard). There is also potential scope to support this by piloting an accreditation system similar to the REVOLVE reuse standard ^[110] which could work as a 'stepping stone' to companies achieving the BS standard and eventual ISO standard.

Investigate the potential issues relating to the use of public procurement frameworks and contract specifications to drive the use of remanufactured content in new vehicles and the use of remanufactured parts and components in service and repair contracts.

A policy of setting minimum levels of reused, repaired, refurbished or remanufactured parts and components (as a percentage of total parts and components spend) could also be considered by the public sector as well as the private sector (where the latter is interested in improving its sustainability performance). This approach is already established in procuring items such as paper, construction materials, etc.

Whether a part or component is reused or remanufactured depends upon the extent to which it is safety critical. For example, a plastic wheel arch could be reused (as it is not safety critical) but items such as brake discs are more likely to be remanufactured.

Develop a better understanding of the education and skills requirements of a future supply chain and identify emerging developments of education and skills training providers (including awareness raising within schools). This process should identify gaps and develop a roadmap to address these gaps.

Identify current and emerging activities in Scotland and beyond about repurposing and upcycling (a specific area of downcycling is addressed in section 9.7). This is likely to involve sectors outside of the automotive sector, including the creative sector, renewable energy sector, etc.).

Work with other sector support organisations to highlight the repurposing and upcycling opportunities arising from parts and components in the automotive sector.

In the longer term the following policy options should be considered:

• Tax credits for the purchase of remanufactured goods
• Regulatory requirements on companies to report material use in accounting
• Taxing material use rather than labour
• Policy and regulatory requirements to support the sharing of knowledge through the supply chain about design, disassembly, servicing, repair, refurbishment and remanufacture (to overcome commercial confidentiality barriers)

It is difficult to set a timeframe for the above longer term policy options (particularly where a fundamental change to taxation policy is involved). The short to medium term opportunities do, however, present a real opportunity to advance the situation in Scotland to take advantage of emerging new business opportunities which have the potential to contribute to economic growth, job creation and a reduction of the environmental burden.

Based on feedback received from ATFs during the research survey a significant number of respondents indicated they did not have (or plan to invest in) specialist equipment to recover and store air conditioning gases. A potential policy option is to raise awareness of the legal responsibilities of ATFs to carry out this depollution task. This awareness raising could be targeted at ATFs and SEPA officers responsible for monitoring licensed ELV treatment sites.

9.4 Enabling measures to support reuse of vehicle parts and components

9.4.1 Supporting the development of a Publicly Available Specification for reuse

As described in section eight, an increase in the reuse of parts and components is projected to have a significant positive economic impact in Scotland. There are several, well understood, barriers to achieving this commercial opportunity. The development of a Publicly Available Specification for reused ELV parts and components has been identified as having the potential to reduce barriers related to market confidence in the quality of the product. There is, therefore, an option to support the development of a PAS at an estimated one-off cost of £65,000. This PAS would be relevant to the UK market.

There are already examples of ATFs working on pilot projects with the insurance industry to increase the use of reused parts and components within service and repair garages. This should be continued and monitored to identify good practice and examples of successful relationships and systems being established.

One of the key issues identified in this project is that currently available PST plants to recycle material from ASR require a level of investment (£20m to £25m) that needs a minimum of around 60,000 to 100,000 tonnes per annum throughput of shredder residue. The arisings of shredder residue in Scotland (from ELV and WEEE) are estimated to be around 60,000 tonnes and, therefore, a recycling facility, based on the technology identified during this research project, is at the edge of commercial viability and susceptible to the threat of contract negotiations by shredder residue suppliers once any such plant were operational (given the need to process all Scottish arisings).

Three ASR processing plants are currently operating in England (where there are greater levels of ASR arisings) but feedback from shredders in Scotland suggest that the transport costs to the nearest facility (plus the gate fee) make this option uneconomic compared to the cost of landfill. As landfill tax increases, an alternative option being investigated by shredders is for the material to be treated by waste management companies (who mix it with other waste streams) for use in the production of SRF. Due to the significant EfW capacity in other parts of Europe it has been suggested that this route will be more economically attractive to shredders than transporting to ASR processing plants in England. The scenario suggested by some Scottish based shredders is that as landfill tax increases, the gate fee charged by waste management companies (which produce SRF) will fall below the cost of landfill. This gate fee will also be less than the total cost (gate fee plus transport cost) of sending ASR to England for some level of recycling.

An option to address this issue with transport costs would be to provide support to fund research and development of a smaller scale processing facility that could be based in Scotland or enhancements to existing shredder processes which could commercially recover more non-metallic materials.

There are a number of other measures that could be considered to improve the level of recycling and the quality of the output material produced. These include:

Based on feedback from the dismantling sector, the non-issuing of CODs is their main concern. As previously mentioned, in section 3.5.1, the last owner of an ELV can complete and submit form V5C to the DVLA. The DVLA does not appear to carry out a systematic cross check that a COD has been issued when the V5C form is received. The V5C form does explain the need to take the ELV to an ATF and that a COD should be issued but this does not always happen.

In the Netherlands, the deregistration system is such that the last owner receives a COD that is the same document they require as evidence that they are no longer liable to pay insurance, tax and ensure the vehicle has a current MOT. The last owner has, therefore, a higher level of incentive to obtain this document, which can only be issued by an ATF.

The result of the lack of systematic cross-checking of the V5C form with the COD database is that a significant proportion of ELVs are treated by unauthorised operators who do not face the same compliance costs as ATFs. This allows these unauthorised operators to offer more competitive prices for ELVs to last owners who do not appear to be penalised for not obtaining a COD. In turn, this leads to monies being lost to the registered sector, which impacts on the availability of investment capital. If the deregistration system were to require confirmation that a COD had been issued (and potentially penalties for the last owner if it is not) then this would make it harder for unauthorised operators to obtain scrap vehicles.

To resolve this issue the DVLA would have to remove the ability for vehicles to be deregistered by any means other than a through a COD being issued, except in exceptional circumstances.

In some other countries ( e.g. Denmark and Norway), the last owner is offered a financial incentive to take their ELV to an ATF and obtain a COD. This is possible due to funds being created though payments via annual insurance premiums (Denmark) or additional fees on the original purchase price of the vehicle (Norway).

The introduction of such a funded scheme would act to increase the incentive to obtain a COD from an ATF and, therefore, reduce the monies lost to the unauthorised sector. The impact of this would be the same as detailed in section 9.6.1 ( i.e. unauthorised operators would find it harder to obtain scrap vehicles).

This would require renegotiation of the producer responsibility aspects of the ELV regulations currently in place in the UK. Such a move would be rendered partially redundant if the incentive for last owners could be created by changes to the deregistration system, as described in 9.6.1.

Another example of a type of funded system, which could be considered, is one that rewards the ATFs for achieving certain levels of dismantling. Such systems are present in the Netherlands and Poland, for example.

In both cases, the funding for this system is raised through monies paid at the initial purchase of the new vehicle. The funds are controlled centrally by a single organisation.

In the Netherlands, the fund makes payments to ATFs based on the achievement of the removal of specific parts and components ( e.g. plastic bumpers and dashboards). This clearly has the potential to directly impact on the quality of materials removed for recycling as it encourage this to be carried out before shredding.

An alternative to providing a financial incentive to ATFs to remove specified materials at the dismantling stage is to create regulations that require this to be carried out. This could be considered to have a direct impact on improving the quality of recycled material by removing it from the waste stream prior to shredding.

There is, however, a potential risk from introducing such a policy. If ATFs were required to remove parts and components, such as plastic bumpers, glass etc., then this would add costs to their business operation (it is not economically beneficial to remove these items or the dismantlers would already be doing so - the increased labour cost does not compensate for the value achieved from the recovered material, and the lost revenue from a reduction in weight sold to shredders). These increased costs would reduce the amount they could offer to last owners for their ELVs relative to the price offered by an unauthorised operator (given that the latter is not adhering to existing regulations, it is unlikely they would do so with additional regulations). In the absence of a cross-check on the issuing of CODs, as a precondition of deregistration, this policy option is likely to result in consequences, as described above.

Some countries ( e.g. Austria and Sweden) have such a legal obligation in place for (at least part of the) glass screens to be removed prior to shredding.

In addition to consideration of regulation to drive the removal of specific parts and components ( e.g. glass/plastic bumpers, etc.) there may also be an opportunity to investigate whether commercial drivers can change market behaviour of dismantlers. Consideration could be given to working with a shredder operator to assess the impact on pre shredder removal of glass and plastics of differential prices being offered for ELV hulks. This project would also assess the commercial impacts on all parties.

Another policy option that could be considered is the introduction of a landfill ban on ASR or an increase in the rate applied to ASR. The aim of this would clearly be to incentivise treatment options further up the waste hierarchy.

If this option were to be applied to ASR arising in Scotland alone then there is a risk that the increasing cost placed on shredders may make the price they are able to offer dismantlers for the vehicle hulks uncompetitive compared with shredders in England. This may lead to vehicle hulks being treated in England, especially in areas around the border where transport costs would be at their lowest.

To enable time to secure investment capital and build treatment facilities, any landfill ban or increased tax rate would have to be set at a reasonable point in future years so that shredders had an alternative option to landfill.

As discussed earlier, there is no economic incentive for dismantlers to remove large plastic components prior to shredding (except in the case where they are removed with the intention of reuse). The quality of plastic removed from ELVs at the dismantler stage will be much higher than that recovered from ASR (which will be contaminated and a mix of polymer types). There is an opportunity to investigate whether public procurement can be used to drive the market for products containing plastics recovered from ELVs.

The same argument can be made for using public procurement to drive demand for material recovered from tyres through use in applications such as publicly funded road and cycle path construction.

The commercial viability of recovering rare earth elements from ELVs is at an early stage, as discussed in section 4.2.4. The levels of rare earth elements in ELVs are relatively low and dispersed throughout different components. This makes their recovery expensive. An alternative policy to be considered would be to develop pilot projects between dismantlers and/or shredders and vehicle producers to identify parts and components containing rare earth element ( e.g. permanent magnets) and investigate the feasibility of removing them at dismantling or post shredder stage, either for reuse (in the case of dismantlers) or recycling (which would include magnets recovered post shredder). The investigation could also cover the potential reuse/remanufacture of other high value metal containing parts, such as catalytic convertors.

The above discussion on policy options can be summarised as follows.

Figure 68 - Summary of potential policy actions