How will the French scrappage scheme continue?

The French government is set to continue with their vehicle scrappage scheme until 2011, officials have said, despite plans for the scheme to originally be phased out by the end of this year. The scheme, which provides government-funded incentives for consumers who trade in their old cars for new ones, has substantially boosted the French car industry this year, sparking a drive to continue with the scheme.

According to data from the CCFA, the French automakers' lobby group, the registration of new cars increased by two percent in August on a year-to-year basis. In addition, so far this year, the market has grown 1.1 percent, compared to the first eight months of 2008.

The government began the car replacement program back in December last year. According to their policy, customers who replaced their old cars with fuel-efficient vehicles would get a 1000 euro rebate from the government. As a result, the sale of cars since May of this year has increased in four consecutive months compared with the same period in 12 months ago.

The scheme was initially set to end on 31 December, but has now been re-evaluated. According to an radio interview with Budget Minister Eric Woerth, the scheme cannot be quickly stopped because of economic considerations, and instead officials have said that the government is looking at methods to smooth the transition to an unsupported market and avoid a slump in car sales.

One option is to reduce the scrapping payment gradually from the current level of 1000 euros, while another option is to mesh the scheme with another existing government incentive that encourages car buyers to opt for low-polluting modelsby offering a system of financial bonuses and penalties on the price of a new car depending on the amount of carbon dioxide that it emits.

The vehicle scrappage scheme, meanwhile, has already cost the government 390 million euros since its inception, and 250,000 car owners have benefited from the success of the scheme.

Elsewhere, in the US, a similar scheme has already ran out of money, and in the UK, the money for their scrappage scheme is expected to run out by the end of October, sparking opinion that if France can continue to provide funding, other countries should follow suit in maintaining a system that clearly works.

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