CO₂ reduction potentials through the market expansion and lifetime extension of used cars

As a case study, I focused on cars newly registered during 1993–2014, both those that remained with their original owners (new cars) and those that were re-registered after being de-registered (used cars). Firstly, this study models the scrappage rate of new passenger cars as a probability density function (namely a Weibull density function). The cumulative scrappage rate in terms of total original cars of a vintage for new cars that are registered in year 0 and de-registered in year t follows the Weibull distribution function described by Eq. (1) (e.g., Kagawa et al. 2011; McCool 2012; Oguchi and Fuse 2014).

Here, m represents a shape parameter and η represents a scale parameter. μ in Eq. (2) represents average vehicle lifetime derived from the Weibull distribution function, and Γ in Eq. (2) is the gamma function. The cumulative survival rate at year t for new cars purchased at year 0 is also easily obtainable as φ _n(t) = 1 − F(t). It should be noted that we have φ _n(0) = 1; in other words, all new cars purchased in year 0 survive in year 0.

Although we can estimate the number of cars “de-registered” after year 0 by using Eq. (1), we still cannot estimate the number of used cars re-registered after the car de-registrations. It is important to note that using Eq. (1), the cumulative survival rate of the used cars that were newly registered at year 0 and survive at year t after re-registration at year τ, φ _u(t, τ), can be modeled and estimated through the following discretization.where f(s) denotes the Weibull probability density function of years for new cars purchased at year 0. Note that used cars survive during t − τ years whereas new cars survive during t years. The concept of the time variables in this study is described in Fig. 1.

The stock of passenger cars at year t, S(t), can be estimated using Eq. (4).

Here, S _n(t) and S _u(t) represent the stock of new passenger cars at year t and the stock of used cars at year t, respectively. Using the survival rates of new and used cars, the stock of new passenger cars and the stock of used cars also can be formulated, respectively, as follows: where B _n(t) and B _u(t) represent the numbers of new and used cars purchased at year t, respectively, φ _n(t − i) is the survival rate for new cars in year t that are newly registered in year i, and φ _u(t − i, τ − i) is the survival rate for used cars that are newly registered in year i and survive at year t after re-registration at year τ. Nishijima (2016) applied this same stock dynamics model to estimate the number of new residential air conditioners sold.

Substituting Eqs. (5) and (6) into the right-hand side of Eq. (4) yields the following stock dynamic equation for new and used passenger cars.

Here I explain how to solve the stock dynamic equation by assuming that passenger cars are newly registered at year 1 (i.e., i = 1 in Eqs. 5, 6). In addition, I assume that all new passenger cars are following the same lifetime distribution, irrespective of their vintage. Noting that no used cars at initial year 1 exist and hence \(B_{\text{u}} (1) = 0\), we have the following dynamic system of equations. It should be noted that when t = 3, τ = 2, and i = 1, we have φ _u(t − i, τ − i) = φ _u(3 − 1, 2 − 1) = φ _u(2, 1). Here, φ _u(2, 1) is the survival rate for used cars that are newly registered at year 1 and survive at year 3 after re-registration at year 2.

In this study, the stock of passenger cars in each year, S(t), is taken to be steady state. Then, when the stock of passenger cars at steady state is given as S′, the number of new passenger cars sold and used passenger cars re-registered can be estimated sequentially as follows:

In Eq. (9), the total of new and used cars sold at year 2 can be estimated by S′ − φ _n(1)B _n(1) (see the second equation in Eq. 9); however, the total of new and used cars sold at year 3 cannot be determined endogenously, because the second and third terms on the right-hand side of the third equation in Eq. (9) are unknown. Therefore, I here define and introduce a parameter for the “revival” rate of used cars (which is the ratio of used cars to the total number of sold cars) as θ; then, the number of new and used cars at each year can be calculated as shown in Eq. (10).where B _n(2) = (1 − θ)B(2) and B _u(2) = θB(2) represent the number of cars newly registered at year 2 and the number of used cars re-registered at year 2, respectively. Thus, we can estimate the number of new cars and used cars sold over time as B _n(t) (t = 1, 2, …) and B _u(t) (t = 1, 2, …), respectively.

The number of the used cars that are newly registered in year i and surviving at year t after re-registration at year τ can also be obtained as Eq. (11).

As a result, the number of the re-registered used cars of all vintages surviving at year t is

Similarly, the number of new cars of all vintages surviving at year t is calculated as

By using Eq. (11), the numbers of the used cars and new cars of all vintages that are disposed of at year t are formulated, respectively, as

From Eqs. (14) and (15), the total number of cars disposed of at year t is computed as \(D(t) = D_{\text{n}} (t) + D_{\text{u}} (t)\).

Defining the average fuel efficiency of an s vintage passenger car and its annual driving distance as e(s) (km/l) and d(s) (km), respectively, the gasoline consumption (liters) required to drive the passenger car for 1 year can be found by dividing the annual driving distance by the average fuel efficiency.The direct CO₂ emissions of a passenger car associated with car driving are calculated by multiplying the gasoline consumption (liters) in Eq. (16) by the direct CO₂ emission intensity (i.e., direct CO₂ generated per unit of gasoline combustion on the road), r _g (t CO₂/l) as follows:The indirect CO₂ emissions of a passenger car associated with car driving are also estimated by multiplying the gasoline consumption (liters) in Eq. (16) by indirect CO₂ emission intensity (i.e., indirect CO₂ generated per unit of gasoline production), r _c (t CO₂/l), as follows:

Summing Eqs. (17) and (18) yields the direct and indirect emissions (i.e., life-cycle emissions) in the driving phase, formulated as follows:

The life-cycle CO₂ emissions of new and used cars registered at year t can finally be formulated as follows:where f _m represents the life-cycle CO₂ emission intensity for producing a new passenger car, f _w the life-cycle CO₂ emission intensity for scrapping an end-of-life passenger car, and \(f_{\text{g}} \left( s \right){\kern 1pt} \,\left( {s = 0,1, \ldots ,T} \right)\) the life-cycle CO₂ emission intensity for driving an s vintage passenger. Accordingly, the first term on the right-hand side of Eq. (20) denotes the life-cycle CO₂ emissions in the pre-consumer phase, the second term the life-cycle CO₂ emissions in the scrapping phase of end-of-life passenger cars, the third term the life-cycle CO₂ emissions in the driving phase of passenger cars newly registered at year t, the fourth term the life-cycle CO₂ emissions in the driving phase of new cars registered during year 1 to year t − 1, and the last term the life-cycle CO₂ emissions in the driving phase of used cars that newly registered and re-registered during year 1 to year t − 1. It should be noted that the emissions in the driving phase of used cars (i.e., last term in Eq. 20) are affected by the emission intensity at driving phase of vintage cars that survived at year t, f _g(s). The emission intensity at driving phase of vintage cars is assumed to be same with the emission intensity at newly registered year. In this study, life-cycle CO₂ emissions indirectly caused by selling used cars such as CO₂ emissions associated with transport, repair, and maintenance for used cars were neglected. The detailed life-cycle analysis of use cars is future study.

I now present the results of applying the method proposed in the previous section and discuss the role of passenger vehicle lifetime change and market expansion of used cars in CO₂ emission reduction policies. Using the two parameters, I can specify the lifetime distributions for cars newly registered during 1993–2014 and for used cars re-registered during the same period. In addition, as in Kagawa et al. (2011), I assumed that the lifetime functions for cars newly registered during 1993–2014 were all the same. Using the specified lifetime functions of new cars, I firstly estimated the survival rate of the used cars that are newly purchased at year 0 and survive at year t after re-registration at year τ, φ _u(t, τ), using Eq. (3). The results are plotted in Fig. 2. We see that, for example, the cumulative survival rate of the used cars that are newly purchased in year 0 (i.e., year 1993 in this study) and survive 3 years after re-registration at year 3 (i.e., year 1998) can be estimated as 0.83 and this survival rate of used cars after 3 years is lower than that of new cars after 3 years (Fig. 2). Thus, as a used car ages, its survival rate will rapidly decrease over time.

In this study, the stock of cars (number of vehicles owned) in each year is taken to be steady state during 1993–2014 even if the average lifetime of passenger cars changes, as shown in Eq. (9). Figure 3 shows the numbers of vehicles owned (one million vehicles) in 2014 for older cars newly registered and used cars re-registered during 1993–2014, as well as new cars newly registered in 2014, for a ±5-year change from the baseline lifetime (11.5 years) that represents the average lifetime of passenger cars. In Fig. 3, the numbers of vehicles owned of cars registered and used cars re-registered in the period of analysis from 1993 to 2014, covering 22 years, are shown in terms of four subperiods: 1993–1999, 2000–2006, 2007–2013, and 2014.

As Fig. 3 shows, holding the total number of vehicles owned (stock) fixed, changes in the average lifetime affect the proportions of new cars, older cars, and used cars. When the lifetime of passenger cars is reduced by 5 years, many older cars of relatively recent model years remain, and few cars that were manufactured and sold during 1993–2006 remain. This indicates that shortening the lifetime of passenger cars shortens the time that car owners own their cars, which they replace within a short period. This encourages the disposal of cars of relatively early model years, with many people purchasing new cars more recently.

Meanwhile, we can see that when the lifetime of passenger cars is extended, many older cars of relatively early model years remain (Fig. 3). When the lifetime is extended by 5 years, older cars manufactured and sold during 1993–2006 account for more than one-third of the total number of vehicles owned. Extending the lifetime reduces the demand for new cars and older cars of relatively recent model years.

Figure 3 shows that extending or shortening the lifetime of cars has almost no effect on the number of used cars owned that were re-registered during 1993–2013 and exist in 2014. This is because new cars account for a high proportion of the total number of vehicles owned, in addition to the short lifetime of used cars compared with new cars. For the baseline (change in average lifetime: 0 years), few used cars that were re-registered during 1993–2006 remain by 2014, accounting for less than 1% of the total number of vehicles owned.

Next, I explain the scenario analysis used to estimate the environmental impact that would occur if the market of used cars were to expand or decline over the 22 years covering 1993–2014. Figure 4 shows the effects of changes in the revival rate of used passenger cars re-registered between 1993 and 2014 on cumulative life-cycle CO₂ emissions during the study period. The vertical axis in Fig. 4 shows how the amount of cumulative CO₂ emissions associated with new and used cars registered during 1993–2014 (baseline emissions: 3131 million tons CO₂-eq. under a benchmark revival rate of 0.4 and benchmark average new vehicle lifetime of 11.50 years) is influenced by a change in the revival rate of used cars. Figure 4 shows that the CO₂ emissions associated with motor vehicle production substantially decrease due to an increase in the revival rate of used cars (i.e., market expansion of used cars), even though CO₂ emissions associated with gasoline combustion increase. The main reason for this is that a market expansion of used cars contributes to reducing the number of new motor vehicles sold; therefore, it has the effect of reducing the number of motor vehicles produced and the amount of CO₂ emissions associated with motor vehicle production.

On the other hand, market expansion of used cars increases the number of old and less fuel-efficient used vehicles still in service and consequently increases the CO₂ emissions from the vehicle fleet on the road. A crucial observation here is that total induced CO₂ emissions, i.e., the combined emissions from motor vehicle production, gasoline refining and combustion, and other services (see Fig. 4), decrease significantly due to a market expansion of used cars. Specifically, a 10% increase in the revival rate of used cars contributes to reducing CO₂ by approximately 0.54%. This finding implies that this market expansion policy would clearly contribute to a reduction in carbon emissions. We find that market expansion of used cars (i.e., a car reuse policy) can play a crucial role in mitigating climate change through a reduction in life-cycle greenhouse gas emissions attributable to the transport sector.

Furthermore, Fig. 5 shows the cumulative CO₂ emissions under combined scenarios of both changing the passenger vehicle lifetime and changing the revival rate of used cars. It is important to note that the baseline cumulative emissions are 3131 Mt CO₂. The important finding is that if the automobile lifetime increases by 1 year from 11.50 to 12.50 years and the revival rate of used cars is set to the baseline value of 0.4, cumulative life-cycle CO₂ emissions can be reduced by 0.6% from the baseline emissions. Note that the environmental benefit of 0.6% is actually considered to be significant, because the CO₂ emissions associated with manufacturing new vehicles are considerably reduced by the lifetime extension.

When a vehicle lifetime reduction policy, such as the vehicle replacement scheme of Japan, is introduced (see the report by the Japan Automobile Manufacturers Association; JAMA (2009) for the Japanese scheme) and the market share for vehicles targeted in the replacement scheme is expanded, significant attention should be paid to the additional materials and parts that are required for producing the target vehicles (e.g., hybrid vehicles with greater fuel efficiency) and how their additional inputs will affect the environment through their productions.

Extending the lifetime of passenger vehicles and expanding the market share of used cars can bring about considerable environmental benefits (i.e., reduction in CO₂ emissions) as viewed in terms of the entire economy (Fig. 5). In contrast to the vehicle lifetime reduction policy, I rather propose a more effective combined policy of vehicle lifetime extension and market expansion of used cars to combat climate change. Specifically, governments can offer incentives to owners of older “greener” vehicles that have better fuel economies to retain and use these vehicles longer. This measure can maximize the environmental benefit as compared to previously introduced vehicle replacement schemes that focus on “new” vehicles. Finally, I conclude that the previous vehicle replacement schemes introduced by many developed countries such as Japan and the USA were not following an environmentally wise policy in the sense that the CO₂ reduction potential through the policy was very marginal.

In the Paris Agreement, adopted at COP21, held in Paris from November 30 to December 11, 2015, Japan set a target to reduce its territorial greenhouse gas emissions by 26% from 2013 levels by 2030 (Ministry of the Environment 2016). For the transportation sector, the target in the drafted agreement is to reduce emissions to 163 million tons by 2030, equal to 72% of the 225 million tons emitted in 2013 (JAMA 2016). Given that approximately 80% of emissions in the Japanese transportation sector are vehicle emissions in both the passenger and freight sectors, the key to achieving the reduction target lies in the choice of how to reduce vehicle emissions (Ministry of the Environment 2014).

In the interest of further reducing transportation sector emissions, the Japanese government has set forth as their technical and demand policies to improve fuel efficiency in new vehicles and increase the percentage of next-generation vehicles (through new vehicle sales), respectively (MLIT 2015). The present study has made clear that, together with these policies, further popularizing “used” vehicles in Japanese society could greatly contribute to achieving the reduction targets. Looking to revitalize the used vehicle market, MLIT is working to build a traceability system by 2020, which will compile a database of accident records, service records, fuel efficiency, number of owners, and other pertinent details for used vehicles (MLIT 2015). I propose that, using this traceability system to account for used vehicle safety and environmental performance, the government introduce a subsidy system to promote the purchase of used vehicles and further popularize used vehicles. The proposed demand policy should greatly contribute to building a low-carbon society.