Select Committee on Trade and Industry First Report


III. THE IMPACT OF THE ELV DIRECTIVE

Depollution

21. The individual treatment and depollution of ELVs prescribed by the Directive does not presently occur in the UK. Universal Salvage pointed out that with the exception of the approved dismantlers that purchase accident damaged vehicles in order to dismantle them for parts, "the average ELV or abandoned vehicle is not drained of fluids. Nor [is] its battery removed or any other form of depollution carried out before it is fed into the metal shredders".[44] The MVDA told us that under the current requirements of the Environmental Protection Act 1990, "sites handling ELVs are usually, although not always, required to drain but not necessarily separate fluids and remove lead acid batteries from vehicles prior to processing".[45] Charles Trent Ltd set out in some detail differences between the UK ELV recycling industry and the standards required by the ELV Directive: very few of the requirements are satisfied completely by the existing ELV disposal industry.[46] Mr Mason of the BMRA told us that less than1% of all ELVs that arrive at shredders or at scrapyards have been depolluted.[47] He went on to say there is no explicit legislation requiring depollution at the moment: pollution control is implicit. For example, shredders are not allowed to put oil into rivers but they are not required to take oil out of cars.

22. The Directive puts strict control on the storage and treatment of ELVs.[48] Establishments carrying out treatment operations must depollute ELVs before treatment and recover all environmentally hazardous components.[49] Priority must be given to the re-use and recycling of vehicle components. For existing facilities that already hold a waste management licence, the main effect of the Directive will be that they will have to comply with the minimum technical standards set out in Annex 1 and Article 6. Any business currently treating ELVs under a registered exemption, or proposing to treat them, will need to obtain a permit under Articles 9 and 10 of the Framework Directive (unless these vehicles have already been depolluted).[50] Any facility, be it a dismantler, scrapyard or shredder, that wishes to handle ELVs will, under the terms of the Directive, need to have a permit and to comply with the required standards.

Costs of processing ELVs under the Directive

23. The DTI's consultation paper included a draft regulatory impact assessment. This estimated the total cost to business of the Directive as between £161 million and £346 million per year from 2006 to 2015, and between £209 million and £438 million per year from 2015.[51] The MVDA saw the main costs arising from processing, enhanced record keeping, and policing.[52]

AUTHORISED TREATMENT FACILITIES (ATFS)

24. There is still some uncertainty as to the exact costs of operating an ATF and the capital investment needed to meet the standards set out in the Directive. It is also unclear to us whether all those with permits to treat or handle ELVs will automatically become ATFs, or indeed wish to do so. The DTI consultation paper said "it is unclear at this stage the scale of the investment the majority of dismantlers will need to make to meet the requirements of this Article [of the Directive]".[53] Charles Trent Ltd told us that they had made the necessary investment and welcomed the Directive. Others were not so sure. Mr John Hesketh of the MVDA told us that it was difficult to know how much the Directive would cost dismantlers and some companies were waiting to see what the costs may be before deciding whether or not to invest.[54] Mr Mason of the BMRA told us it would cost around £100,000 for a "twin rig, a state of the art depollution rig" for shredders. Of his company's recent decision to install such a rig he said: "we will not have any change out of about £240,000 for the building, the storage of liquids, petroleum licences, changes in working plans and licences and the acquisition of the building in the first place".[55] The DTI consultation paper estimated it will cost around £4,000 per annum to obtain a licence to become an ATF.[56] The administrative costs for an ATF are estimated at £12 per ELV.[57]

25. There is some concern that there will not be enough registered facilities to deal with ELVs by April 2002. Mr Evans of the RMIF said: "there are inadequate facilities currently to cope with the number of vehicles which are either abandoned or which have reached the end of their lives".[58] Mr Wemyss of the MVDA told us: "I am sure that at April there will be a shortfall" of dismantlers that can meet the standards set out in Annex 1 of the Directive.[59] Toyota agreed that few ELV treatment sites currently operate to the requirements of Annex 1.[60] Honda expressed deep concern over the lack of treatment facilities that comply with Annex 1 requirements.[61] The SMMT cited a survey undertaken by the Consortium for Automotive Recycling (CARE) in 1991 to look at the current practice of handling ELVs and the requirements of the Directive. The survey found that:

    "There were a number of high volume salvage dismantlers that had invested in Annex 1 requirements and could meet the needs of the directive but these sites would only be able to deal with around 15% of the ELVs arising due to capacity restrictions and geographic location".[62]

26. The BMRA remarked that most of the depollution would be done in dismantlers and local scrapyards, many of whom would not be able to justify the cost of investing in new facilities to qualify as an ATF.[63] The RMIF told us that their members were "unlikely to wish to qualify as an authorised treatment facility with all that will entail in terms of cost".[64] In oral evidence Mr Evans told us that an independent repairer would face such costs as:

    "Licensing, premises for storing vehicles, employing technicians who know what they are doing, dismantling, taking things apart, accounting to the local authority, depolluting where necessary and having to satisfy the regulations as to the recycling of parts and all the rest of it".[65]

Mr Mason of the BMRA told us: "I think there will be some closure of both dismantlers and some of the smaller scrap trade because they will not want to invest heavily" in their sites.[66] It seems likely that a number of existing dismantlers will cease to operate once the ELV Directive is implemented.

27. Charles Trent Ltd said they were "deeply concerned" that there would be "blanket authorisation" of all or most existing sites in order to ensure sufficient sites to cover demand.[67] The DTI told us that people would be forced to meet the standards set out in the Directive.[68] We are concerned that there may be a shortfall in the number of Authorised Treatment Facilities ready to deal with ELVs in April 2002.

28. We are not confident that the Government has made an accurate assessment of the condition of the vehicle treatment industry after the Directive is implemented. Officials seemed to be of the view that the UK would muddle through. Although this may be true in the longer term, in the short term the UK may be faced with too few treatment facilities meeting the environmental requirements. This will lead to the UK either breaching the terms of the Directive by allowing 'sub-standard' operators to continue, or having to stockpile increasing numbers of ELVs waiting to be treated at Authorised Treatment Facilities.

UNIT COSTS

29. There is no doubt that one of the main impacts of the ELV Directive will be the costs associated with the depollution of ELVs. Figures provided to us indicate that there is some consensus this will amount to around £40 per vehicle. Assuming that ELV processors work to certain minimum standards such as removing and recycling tyres, batteries, fuel and engine lubricant, Charles Trent Ltd estimated that the current net cost of ELV processing is just under £2 per ELV.[69] Charles Trent and the MVDA indicated that the cost of processing ELVs to Annex 1 standards would rise to almost £40 per vehicle.[70] The SMMT told us that their research indicated that the typical cost per vehicle will be £45.[71] Mr Mason of the BMRA also put the figure for depollution at around £40 per car: "that [depollution] is not done in the UK, and nobody would do it in the UK because it would make cars quite strongly negative value at the moment even if they are [currently] around about zero or slightly positive".[72] The DTI consultation paper's draft regulatory impact assessment looked at the Dutch system for recycling where costs of treatment and recycling in 2000 were equivalent to around £50 per ELV.[73] In the consultation paper on abandoned cars, the DTLR said the costs of treatment under the Directive could be around £100 per vehicle.[74]

THE IMPACT OF THE DIRECTIVE ON COMPETITIVENESS

30. It is not clear what the impact of the Directive will be on the competitiveness of the shredding and dismantling industries. Mr Mason of the BMRA said there may not automatically be a market for some of the materials that are removed from ELVs to be recycled.[75] Pilkington Glass told us that 1.8 million cars could theoretically yield around 54,000 tonnes of used glass or 'cullet'. This potential raw material feedstock will have to compete with virgin raw materials that cost around £35 per tonne, and existing cullet that costs around £30 per tonne. The calculated costs for producing ELV cullet would be between £215 and £233 per tonne.[76]

31. Additional information was submitted by the SMMT. Their assessment of the impact of the Directive on the shredding and dismantling industries provided estimates for the costs involved and argued that the commercial profitablity of shredders could be increased if they accepted complete vehicles. The SMMT went on to say, however, that if the shredding industry could simply name a price for disposing of ELVs, and pass that on to manufacturers "what possible incentive is there for the shredding industry to become more competitive under those circumstances? They can just sit back and take the money."[77]

32. Motor manufacturers are clearly also very concerned about the impact on individual companies' competitiveness of simply passing assumed costs of processing ELVs through to the vehicle manufacturing sector. MG Rover have estimated that up to £500 would need to be added to the new car price for the UK market[78] and Toyota have estimated that it could inherit a potential liability of around £70 million.[79]

33. Of particular concern to motor manufacturers is the possible obligation to book one off reserves to cover a pre-assumed cost of disposing of the entire 'historic car parc.'[80] Ford have argued that "the reported profit and loss account will be adversely affected, as will the creditworthiness of the balance sheet. Loan covenants breaches may as a consequence arise, trigger immediate debt repayment, higher financing costs or both. The effect, plus the crystallization of the liability, could very possibly result in insolvency."[81] MG Rover have argued that, as a medium sized company, descended from a range of much larger companies, it could suffer particularly harshly, with a return to profitability being delayed and its solvency threatened.[82]

  34. The Directive states that "producers" (manufacturers and importers) should bear "all or a significant part" of the costs but it is left to Member States how this will be achieved.[83] Although we understand that the DTI's consultation paper would not wish to pre-empt discussion on such a key issue, it is unfortunate that with only a few months to go before the Directive must be implemented, the DTI has not set out clearly how these costs will be met.

Certificates of Destruction

35. All ELVs will be issued with a Certificate of Destruction (CoD) by an Authorised Treatment Facility. The reliability of the issuing system is crucial to ensure that vehicles do not re-enter the market after a CoD has been issued. Certificates will also provide information on the number of vehicles treated and recycled. Valpack told us that in their experience, "a single clearly defined point in the chain needs to be identified as the most practical stage to determine that a given tonnnage of ELVs has been treated and that the resulting material has been sent for reprocessing".[84]

36. The DVLA are trialling electronic systems for issuing CoDs. A pilot scheme has been running since 25 May 2001. The system is currently 'one-way' with information going to DVLA but it will become a 'two-way' link. The DTI estimated that it would cost around £2,000 for each ATF to install a computer to run the electronic system.[85] The MVDA pointed out that the staff to operate them will be a further expense for many existing operators.[86] BMRA companies are participating in the pilot scheme. Mrs Dawn Allen told us "the only problem we are having is the time it is taking to actually put the throughput to the DVLA".[87] The DVLA told us the system "is being developed to support a minimum of 2 million notifications a year".[88]

37. The DTI told us that CoDs "would be issued at the point of entry into the system, whether that is at a dismantler, or shredder, or what have you, and ... would only be issued once".[89] The DVLA told us the last registered keeper of a vehicle would be issued with a certificate:

    "Generation of the certificate will trigger an electronic notification to the Driver and Vehicle Licensing Agency. This will update the vehicle record and end the keeper's responsibility for the vehicle".[90]

38. There seems to be confusion, however, over whether a CoD guarantees a vehicle has actually been destroyed. The DTI consultation paper asked for views on "whether it should be possible for vehicles to be returned to the road after a CoD has been issued".[91] The SMMT believed that there should be a two stage Certificate of Destruction; one when the final owner hands over the vehicle to the treatment facility, and a second when the vehicle is actually destroyed.[92] The BMRA agreed that a two stage system has some merit: the MVDA felt that a two stage system could work.[93] The DVLA told us: "details of the safeguards which will be in place to ensure that an ELV will not be returned to the road have not yet been finalised".[94]

39. The Directive requires the European Commission to draw up minimum standards for the CoD by 21 October 2001.[95] The DVLA told us a working document was issued on 6 September 2001, it was discussed on 2 October 2001, but a final proposal is not expected until January 2002.[96]

40. It is not yet clear exactly how the system of issuing Certificates of Destruction will work. The DTI and DVLA must issue clear guidance on each step in the process and where the ultimate responsibility lies. We think there is some merit in a two stage process. The owner would receive a document to prove that he/she no longer had responsibility for the vehicle, but the vehicle would not be finally 'signed off' until it was actually destroyed. We trust that any problems the DVLA are currently having with handling large numbers of CoDs are dealt with well in advance of the system going live.

41. The DVLA told us that "it is highly unlikely that a fully automated system to issue CoDs can be rolled out" by 21 April 2002, when the Directive comes into force.[97] The DTI's consultation paper noted that it would not be sensible to run a paper system in parallel with the electronic system, and: "all permitted facilities would need to have electronic systems in place from the outset". Given that the electronic system for issuing CoDs will not be rolled out when the Directive comes into force in April 2002, we are concerned there will be some confusion when the initial CoDs are issued. We recommend that the DTI set out clearly how the initial issuing of CoDs will work. We trust that there will be a smooth and speedy transition to the fully automated system.


44   Ev, p54 Back

45   Ev, p34 Back

46   Ev, p45 Back

47   Q114 Back

48   Annex 1 of the Directive sets out the Minimum Technical Requirements for Treatment in accordance with Article 6 Back

49   Article 2 (5) of the Directive defines 'treatment' as "any activity after the end of life vehicle has been handed over to a facility for depollution, dismantling, shearing, shredding, recovery or preparation for disposal of the shredder wastes, and any other operation carried out for the recovery and/or disposal of the end of life vehicle and its components" Back

50   DTI consultation paper, paras 8.2-8.3 Back

51   DTI consultation paper, para 12.63. 2015 is the date at which the 95% (by weight) recycling obligation starts Back

52   Ev, p34 Back

53   DTI consultation paper, para 12.36 Back

54   Q178 Back

55   Q123 Back

56   DTI consultation paper, para 12.37 Back

57   DTI consultation paper, para 12.33 Back

58   Q2 Back

59   Q201 Back

60   Ev, p7, para 3.6 Back

61   Ev, p20 Back

62   Ev, p14, para 13 Back

63   Q153 Back

64   Ev, p2, para 9 Back

65   Q20 Back

66   Q117 Back

67   Ev, p42-3 Back

68   Q247 Back

69   Ev, p47 Back

70   Ev, p48: Ev, p34 Back

71   Q88 Back

72   Q114 Back

73   DTI consultation paper, para 12.39 Back

74   DTLR consultation paper on abandoned vehicles, para 19 Back

75   Q125: he mentioned recycling plastics as a particular problem Back

76   Ev, p32 Back

77   Q66 Back

78   Ev, p68 Back

79   Ev, p66 (based on £100 per ELV) Back

80   See also paragraphs 53-55 Back

81   Ev, p60 Back

82   Ev, p68 Back

83   2000/53/EC (para 7) Back

84   Ev, p15 Back

85   DTI consultation paper, para 12.31 Back

86   Ev, p35 Back

87   Q183 Back

88   Ev, p109 Back

89   Q254 Back

90   Ev, p54 Back

91   DTI consultation paper, para 7.7 Back

92   Q80 Back

93   Q146: Q189 Back

94   Ev, p109 Back

95   Article 5(5) Back

96   Ev, p110 Back

97   Ev, p109 Back


 
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