You may think auto recycling is just about scrapping end-of-life vehicles, but both state and federal legislation initiatives are shifting the landscape dramatically. States are pushing for stricter recycling mandates and incentives for using recycled materials in manufacturing. Meanwhile, federal initiatives are exploring tax credits for eco-friendly practices in the industry. These changes could redefine profitability in auto recycling and drive innovation.
“The nature of automotive content – including light weight and battery materials – has changed dramatically with the expansion of electric vehicle (EV) production,” said Jamie Tucker, lobbying and public policy partner at Akin, LLP. “These different materials have different environmental attributes forcing policy makers to view recycling much differently.”
In addition, Tucker pointed out that some policy makers at both the federal and state level are focusing on extended producer liability under which the manufacturer has responsibility for its product throughout its life-cycle, while others have concerns about the costs of such an approach.
“As with many other environmental issues, getting consensus in Congress will continue to be a challenge, so action is more likely at the state level or through regulatory action at the Federal level,” Tucker said. “At the same time policy makers recognize the need to create better recycling technologies, especially with respect to advanced battery materials, so they have been willing to provide funding for R&D to advance those technologies.”
According to Troy Webber, president of Chesterfield Auto Parks and chief executive officer of Yardsmart in Richmond, Virginia, state and federal legislation affecting the automotive recycling industry has changed in recent years.
“There are more efforts to restrict used part sales. Also, state laws which allow unlicensed individuals to purchase salvage vehicles are less restrictive,” Webber said. “Electric vehicles have also created an entirely new realm of governance that the industry has never been involved in before. While the federal government tries to stay ahead of the curve, we, the recyclers, are having to learn on the fly and figure out how to adapt to the changing automotive industry as it is comes through the gate.”
Webber also pointed to state legislators being pressured by insurance companies and auto auctions to allow the unlicensed public into salvage auctions to buy scrap cars. As he explained, the reasoning is that if the public can buy salvage cars at auctions, there will be more bids and the cars will be sold at a higher price.
“The problem with that concept is, the public will be able to buy salvaged cars and put them back on the road or sell them,” Webber said. “The reason for laws that require you to obtain a salvage license to buy salvaged cars is to avoid inflating demand without increasing supply. On its own, this would destroy the auto recycling businesses.”
On the national level, Webber said the automotive recycling industry needs to keep its eye on legislation around recycling EVs and their batteries. For the first time in industry history, auto recyclers are dealing with a dangerous commodity that cannot be easily recycled, stored, shipped or sold. And the Environmental Protection Agency has begun regulating stricter guidelines for the increased recycling of lithium-ion batteries from EVs.
“Just like in ‘Cash-for-Clunkers,’ no one thought to talk to the auto recycling industry before they started mass-producing vehicles with a power train that can’t be recycled,” Webber said. “We are figuring this out as we go, and so is the federal government. If we are not paying attention, there will be laws and regulations passed that govern how our industry handles EV’s without our input.”
In addition, as the automotive industry evolves, so will the legislation governing it. “The unfortunate, but true fact of our political system is that money talks,” Webber said. “We need to have a unified voice in this discussion, and that voice comes from the Automotive Recyclers Association. As individual businesses, it is difficult to be heard as just one voice. If we do not have a voice at the table we will not be heard and that will result in more laws being passed without our input that affect our businesses.”
In fact, the ARA works to monitor and impact legislative issues facing the industry. ARA has already secured several legislative successes in state legislatures. According to the ARA, the association has been working with local recyclers and industry stakeholders in multiple states such as Washington, Idaho and Florida.
As the ARA explained, in Washington State, ARA opposed House Bill 2011 and Senate Bill 6252, both of which require that any insurance covered vehicle repair follow OEM procedures and processes. ARA raised concerns with this language since several OEMs have public processes and procedures that disallow the use for recycled original equipment motor vehicle repair parts.
In Idaho, ARA opposed Senate Bill 1233, which is against the use of aftermarket repair parts and repair parts not sourced by an OEM. For example, in the case an insurance repair includes the use of aftermarket or repair parts not sourced from an OEM, the bill would require an insured vehicle owner to receive a written estimate containing a statement that “use of nonoriginal equipment manufacturer (non-OEM) crash parts may affect the safety and performance of your vehicle. It is recommended that you consult with a qualified industry expert or repair shop before making any decisions regarding the use of non-OEM crash parts.” This statement is designed to dissuade vehicle owners from using any part other than one sourced directly from an OEM.
Of course, each state has pushed state-specific laws and regulations that affect auto recyclers, For example, in New York’s Electronic Equipment Recycling and Reuse Act, businesses that sell or manufacture electronic equipment must provide a system for recycling electronic waste. Retail businesses cannot sell devices from companies with no recycling system. Businesses must submit annual reports to the DEC through the E-Waste Online Registration and reporting system. This act naturally extends to electronic gadgets in cars – everything from infotainment systems and batteries to advanced safety features that generate tons of e-waste. Auto recyclers may have to partner with e-waste processors to ensure these electronic components are recycled responsibly.
Florida’s Vehicle Reuse and Recycling Program is focused on automotive reuse and recycling by encouraging auto recyclers to prioritize reuse and recycling and the program’s loan program offers funding to auto recyclers so they can upgrade their facilities, buy new equipment, or even team up with manufacturers.
So how will these legislative initiatives continue to evolve? What are the biggest instigators impacting the legislative activity surrounding issues that could affect the auto recycling industry?
“Historically, environmental and health considerations have driven policies related to recycling, but going forward, national security will also play an increasing role as recycling can lessen U.S. reliance on foreign suppliers of critical materials and components,” Tucker said.
Of course, any legislation or regulations passed on a state or federal level do need to be adhered to by auto recyclers. By adhering, automotive recyclers may avoid fines, improved eligibility for government incentives, and potentially expand their customer base by connecting with consumers who are actively monitoring the environmental impact of end-of-life vehicles and who are interested in utilizing recycled auto parts whenever possible.