Development Process of Automobile Scrapping and Recycling System in South Korea and its Response to Electrification

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Abstract:

The purpose of this presentation is to clarify the current status and challenges of end-of-life vehicle (hereinafter referred as ELV) recycling in South Korea (hereinafter referred to as Korea), based on the framework of value chains in a broad sense in the transition of circular economy that is essential for sustainable development.

In addition, through institutional comparisons with Japan and Germany, it will identify the characteristics of Korean vehicle scrap and recycling system. In particular, from the viewpoint of EPR (Extended Producer Responsibility), it will illustrate that the Korean vehicle scrap and recycling system has developed in accordance with actual conditions of the relevant industry, while being strongly influenced by the EU system.

Value chain, which is a map of corporate strategy, has traditionally been regarded as a gradual and continuous flow of value creation from raw material production, intermediate goods production, end product assembly, and sales. However, in the era of decarbonization and circular economy, the scope of the value chain also needs to be expanded.
In this presentation, to adapt to such environmental changes, I suggest the concept of value chain in a broad sense that covers the parts of production, consumption (utilization), and recycling and disposal.

Before discussing the automobile recycling system, it is necessary to consider the underlying idea. There are various views on who should be responsible for the environmental impact caused by the production, consumption, and disposal of automobiles. First, there is the idea that polluters should bear the environmental costs (Polluter Pays Principle), which has been appearing in the OECD since 1972.

However, the scope of polluters is interpreted as not only those who throw away waste products, but also those who benefited from the business and consumption of the product.
The main beneficiaries are the users of the product and those who have profited from the product business (producers, dealers, etc.). In particular, EPR, which is “an approach to environmental policy that extends the physical or economic responsibility of a producer over the product life cycle” (OECD Guidance Manual, 2001)" has spread worldwide.
Various voluntary and compulsory EPR systems reflecting the idea of EPR have become widespread, and Korea is no exception.

As of the quarter of 2022, the number of registered automobiles in Korea reached 25.07 million units, and it is entering an era in which two people own one car.
As the number of registered vehicles increased, the number of scrapped vehicles has been increasing and it reached 864,000 in 2022.

The origin of the scrapping system in Korea goes back to the link between scrapping and deregistration under the "Road Transport Vehicle Act" came into force in 1962, and this made it easier to identify where and how many abandoned vehicles there are. From the 1960s to the early 1980s, Korea introduced and spread a system for the proper disposal of ELVs. The system at this time focused on strictly regulating inappropriate reuse and recycling.
Since the latter half of the 1980s, the Korean government has reinforced reuse, proper disposal, and recycling ELVs at the same time. In the 2000s, although there were expansions and further elaboration of recycling, such as the inclusion of advance management in the system, it remained as the only obligation to make the best efforts without penalty.

The basis of the current recycling of scrapped vehicles in Korea is the "Environmental Assurance System" that institutionalizes the restriction of the use of hazardous substances in waste products and the promotion of reuse and recycling based on the "Act On Resource Circulation Of Electrical And Electronic Equipment And Vehicles" (hereinafter "Resource Recycling Law") (2008). This system comprehensively incorporates the EU's Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical Equipment (RoHS), Waste Electrical and Electronic Equipment Directive (WEEE), and End-of Life Vehicles Directive (ELV Directive), and is adapted to the situation in Korea.

The following points can be seen when comparing the vehicle scrap and recycling system in Korea with that in Japan and Germany. Regarding who to pay for reuse and processing, in Japan, consumers pay this cost in the form of deposits when purchasing a new car while in Germany, the manufacturer bears the cost in consideration of the scrapped car price. In Korea, the manufacturer bears the cost only in the case of inverse onerous contract. Under invers onerous contract, owners of ELVs should pay for disposal of their ELVs, because disposal and recycling cost of end-of-life vehicles exceeds the remaining value of end-of-life vehicles. As to the extent of the obligation of recycling and disposal by manufacturers, in Germany, the scope of responsibility extends to the entire process of recycling, and in Japan, it is limited to three items: chlorofluorocarbons, airbags, and shredder dust, and in Korea, the entire process is limited only in the case of inverse onerous contract. In terms of the regulation of hazardous substances for preventive measures, Germany and Korea have clearly stated regulations prohibiting the use of four designated items as of 2015.

Comparing the scrapping and recycling systems of the three countries, the Korean system is conditional compulsory EPR under inverse onerous contract while the German system is a total compulsory EPR, and the Japan system is a compulsory EPR limited to three items.
In order to prepare for further electrification, Korea added regulations on waste batteries to the Resource Recycling Law (Automobile Recycling Law) in 2020.