Beijing to Drivers: Give Up Your Car, We'll Pay You $3,600


Photo: AP/Greg Baker
Desperate Times
Beijing is so desperate to get high-polluting cars off the roads, the city has devised a scheme that will pay citizens as much as $3600 to give up heavily polluting vehicles -- and even give drivers more money to purchase cleaner cars.The scheme by the environmental protection bureau is only one part of a massive plan to get Beijing's more than 350,000 high-polluting vehicles out of the city during 2009. China's capital has already banned cars from the roads on one of five weekdays based on their license plate number as part of a six-month trial that follows broader anti-traffic restrictions during the 2008 Olympic Games. The pay-off, say officials, is a 7 percent rise in blue sky days this year (although as we've mentioned, that statistic remains suspicious).

The initiative would take about 10 percent of the city's 3.5-million registered cars off the roads -- an amount that is estimated to account for 50 percent of the city's notorious vehicle pollution.

Fine Print
But with the carrot comes a stick. Under the new rules, people driving vehicles that do not meet Beijing's very lowest emission standard, Euro I will be fined 100 yuan (about US$12) if caught within the city's Fifth Ring Road, or within a radius of 10-15 km from the city center, after a three month grace period.

Though the fine is roughly equal to 13% of the weekly income of the average Beijinger, those driving high emission, or "yellow label" vehicles, tend to have lower incomes than those tooling around in shiny new Geelies or Audis. The "yellow label" Euro I standard was adopted in 1992, and new cars in Beijing must follow the Euro IV standard, adopted last year.

As of October, the ban on "yellow label" cars will apply to any cars within the city's sixth ring road too.

In addition to the ban, Beijing is also introducing a new fuel tax of 0.8 yuan per liter (US$0.45 per gallon). Revenues from the fuel tax will go toward improving the roads and water routes. The price of fuel will remain static however, given a recent drop in global fuel prices.


Beijing's older bread box cars, or mianbaoche, are a "yellow label" usual suspect. Photo: Flickr user MDTubio
Leave Your Car Please -- We'll Pay You!
Under the compensation plan, rewards for drivers of "yellow label" vehicles will depend upon the size, type and age of the vehicle, with older and larger vehicles receiving higher rewards. Payment will also be prorated, so that the sooner the car or truck is decommissioned, the more money the owner will receive.

Owners could be paid between 25,000 and 800 yuan during the first phase, which lasts until July 1, and 22,000 to 500 yuan during the second, which ends on Dec. 31st.

The plan would also include subsidies and low-interest loans for the same owners to purchase newer, more environmentally-friendly vehicles.

Balancing Act
Since the Olympic Games ended -- taking with it some of the pressure to clear the skies -- Beijing has been struggling to balance its environmental priorities with its economic ones. Cars may be partly responsible for a growing onslaught of pollution, gridlock and accidents, but the mostly state-owned automotive industry is part of China's economic backbone, a backbone that needs all the support it can get during the global recession.

Beijing's answer so far has included banning a fifth of the city's cars each day, using taxes to incentivize small cars, and building public transit.

But economic problems aside, China's automotive yen has shown no signs of slowing. In 2008, passenger car sales rose by 7.4 percent to 6.43 million vehicles -- or 17,600 cars sold every day.

Next: Olympic hero Michael Phelps will help Mazda sell more cars in China.

Boon for BYD
Fortunately, more Chinese automakers are taking the government's hint -- and recognizing the growing demand among consumers at home and abroad for cleaner vehicles. While GM drums up interest in its Chevy Volt, which is still three years from sale, China's leading battery manufacturer, BYD, is already selling the world's first mass-production plug-in hybrid electric car, the F3DM.

By pushing people out of inefficient and heavily polluting cars while subsidizing the purchase of cleaner vehicles, the Chinese government is doing exactly what the US government might have done years ago: raise demand for cleaner cars while giving the auto industry the kick it needs to build cleaner.

"Cash for Clunkers" in the US?
Paying drivers to stop driving their old, smog-spewing cars, is a bold, new idea. But during an impending economic crisis, encouraging spending is not a bad thing, especially if it is paired with an incentive to purchase a low-emission vehicle.

Alan Binder, economic professor at Princeton, has been pushing the "cash for clunkers" idea for some time, most prominently in a Times piece last summer. Not everyone's a fan, but the idea has already been implemented to some success in France. (Trials are also happening in California, Colorado, Delaware, Illinois, Texas, Virginia and several Canadian provinces.).

The Brookings Institute is behind it. And now the US Congress is considering including a similar policy in an economic stimulus package.

As Binder writes, the cost of a possible US "cash for clunkers" program, something in the single-digit billions, would buy a few things besides a jump-start to the auto industry:

First, less pollution. The Texas program estimated that clunkers spew 10 to 30 times as much pollution as newer cars. Second, the subsidy value (the 20 percent premium in my example) is a direct income transfer to the owners of clunkers, who are mostly low-income people. Third, these folks would almost certainly spend the cash they receive — not just the subsidy, but the entire payment, giving the economy a much-needed boost.

Beijing's traffic and pollution problems have become one of the city's saddest monuments. But this kind of shocking policy may be just what it and other cities need to alert car owners in particular to the negative impact they are having on their city's air -- and to demonstrate the positive impact they could be making by driving cleaner and driving less. And with effects that could go far beyond stimulating the environment, the pay off could be enormous.

China Daily and Sina (Chinese)

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Tags: Beijing | China | Driving