The German government has agreed to scrapping incentives to encourage owners of cars aged over nine years to buy new fuel efficient models.

And, from 1 July 2009, all ownership taxes will be based on CO2 emissions rather than engine size.

The move to offer scrapping incentives is part of the government’s second economic stimulus package worth EUR50bn. The government has set around EUR1.5bn aside for the boost for the car market.

The German vehicle manufacturers’ trade association, the Verband der Automobilindustrie (VDA), welcomed the action.

“The measures won’t just help keep vehicle manufacturer and supplier jobs secure, they will also help reach climate change and environmental protection goals,” said president Matthias Wissmann.

Owners of cars over nine would receive a EUR2,500 discount on a new or current year car that meets at least Euro 4 emission standards, as long as the replaced vehicle is scrapped.

Not everyone thinks the incentive is a good idea, though. A trade association for parts dealers told Automobilwoche the government was throwing money out the window.

“People who drive nine year old cars are not typically buyers of new cars,” a spokesman said. The association warned that the full ecological equation needs thought – and cars still fully functioning should not be thrown away.

“It would be better if the government gave tax incentives for people to maintain their old cars,” he said.

PricewaterhouseCoopers (Pwc) estimated the scrapping incentive could boost the market by around 300,000 units. However one analyst warned that because the owners older cars would not be buying premium models, import brands mainly would benefit.