How the EU’s car scrapyard law can bring clean steel and aluminium to Europe

Alex Keynes — July 6, 2023

A revised EU law on used vehicles should be as much about what goes into making a new car as about how it’s recycled at the end of its life.

As the automotive industry accelerates its shift towards selling only battery electric cars in Europe by 2035, the footprint of vehicle production is coming more and more into the spotlight.  As policymakers and carmakers alike strive to address the non-tailpipe lifecycle emissions from vehicles, improving the circularity of materials recycled and recovered from scrapped cars for use in new cars will also become increasingly important.

With tailpipe emissions reducing and on a path to zero, emissions from a vehicle’s materials are expected to account for 60% of its total life-cycle emissions by 2040. Steel and aluminium make up the biggest part of the non-use phase chunk, with steel alone responsible for between 30-40%.

The automotive industry is heavily dependent on steel and makes up 12% of demand globally, (as well as 18% of aluminium demand). The sector can therefore be an important driver to unlocking the potential of green production processes for both metals.

The current EU policy framework, including the existing Directive on end-of-life vehicles (ELV Directive), is lacking, however, and was developed with a linear automotive industry in mind.

An often forgotten part of the European Green Deal, the ELV Directive might not be the most fashionable piece of legislation, but it has the potential to be transformative. As the European Commission prepares its proposal for a revision of the legislation (due out on 11 July), there is an opportunity for a root and branch overhaul of the current law to one that addresses the lifecycle of vehicles from cradle to grave – or rather from car factory to breakers yard, similarly to what was done when the EU expanded the previously narrow ‘end-of-life’ scope of the old Battery Directive.

As well as incentivising the use of low-carbon materials in new cars, policymakers must also address some other basic shortcomings in the existing legislation.

1. Stimulating low-carbon materials in new cars

Carmakers are the largest buyers of carbon-intensive materials such as steel and aluminium and therefore have a huge say in how clean these are. Premium carmakers in particular should drive the uptake of clean materials such as green steel and aluminium. The new ELV law can accelerate this momentum.

Similar to the recycled content targets of the new battery regulation, the ELV directive should set carmakers a 20% target for low-emission steel and aluminium to be used in new cars sold across Europe. This can be met either via recycled metals or by using lower CO2 virgin materials (or a mix of both), thus giving flexibility to carmakers on how to meet this. This will also create volume certainty for steel and aluminium producers to invest in new low and zero-carbon production processes. 

T&E recommends that the threshold for what constitutes ‘low carbon’ be set between 4-5 tons of CO2 per ton of aluminium produced, which would incentivise both primary aluminium made with hydropower and also recycled scrap. For steel, the International Energy Agency (IEA) and ResponsibleSteel standard define near-zero steel production as having an emissions intensity below 0.4 tons of CO2 per ton of steel, which would also include and incentivise the use of both recycled and green primary steel. This threshold would apply until 2030, after which the priority should be to scale up green hydrogen-based DRI primary steel production, which can already reach an emission intensity as low as 0.05 ton CO2. 

2. Preventing vehicles – and the valuable materials in them – going missing

Each year, around a third of all end-of-life vehicles in Europe go missing. Although it seems strange that you could lose a car, typically these vehicles – between 3 and 4 million per year – are exported (as used vehicles or illegally as ELVs) or fall into Europe’s grey market of illegal dismantling.

For the EU, not only does this pose a serious environmental hazard with millions of litres of hazardous liquids not being properly treated, it also means a loss of valuable materials, posing a more serious problem if this trend continues with the uptake of electric cars and the batteries inside them.

To prevent this, the EU should take and apply best practice examples that link vehicle deregistration and scrappage by authorised professionals to financial incentives for the owner. In Denmark, the so-called ‘scrappage premium’ rewards drivers who send their old clunkers for treatment in an authorised centre with a €300 bonus, which is funded by the driver themselves via an annual tax. 

Furthermore, to prevent the export of old and substandard vehicles to developing countries, which is causing high air pollution and hazardous waste in the Global South, the Commission should establish minimum requirements for used vehicle exports, including a minimum emission limit (at least Euro 5) and the declaration of a recent and valid road worthiness certificate. If it isn’t allowed on our roads, it shouldn’t be driving on theirs either. 

3. Improving both the quantity and quality of recycling

Although the current end-of-life legislation focuses on recycling it lacks specific quality requirements. This means the vast majority of the recycled material is not being used in new cars but is being ‘downcycled’ to other sectors like buildings as the quality is often not up to scratch. 

The revision of the ELV legislation is an opportunity to ensure key automotive materials like aluminium, steel and plastics are used in a closed loop and therefore contribute to decarbonising automotive manufacturing. To help promote more and better recycling of these materials, the EU should move away from the recycling targets based on the overall weight of the cars and set targets per material type and with quality requirements (for example, on copper contamination in recycled steel).

The EU made a significant step towards decarbonising the automotive sector when policymakers agreed to phase out polluting combustion engine cars and vans from 2035. Now is the time to make car production truly circular and sustainable. If the Commission is bold, the revised ELV Directive can play an important enabling role by not only reducing the number of missing vehicles and the leakage of valuable materials in them, but also by requiring carmakers to use a growing share of recycled and low-carbon materials when building new cars.

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