Accelerated vehicle retirement program: Estimating the optimal incentive payment in Israel

• Accelerated vehicle retirement program in Israel is analyzed.
• Benefits of reduced pollutant emissions and safety were compared to costs.
• For private vehicles a differential payment scheme has a higher net benefit.
• The optimal payment is higher than the existing incentive payment.
• It is economically feasible to include light commercial vehicles in the program.

The paper analyzes two main aspects of the accelerated vehicle retirement program in Israel: the optimal incentive payment of private cars, and the feasibility of expanding the program to include light commercial vehicles. The benefits are the reduction of pollutant emissions and safety benefits, which were compared to the costs of the incentive payment. A differential payment scheme for private vehicles according to the vehicle’s age, is shown to have a higher net benefit than a uniform payment scheme. It is also found that the optimal payment is higher than the existing incentive payment. Additionally, it is found economically feasible to include light commercial vehicles in the program.