MUNICH, GERMANY — There are good ways to do cash-for-clunkers programs, and there are bad ways, and then there is Canada's way, which is to do essentially nothing at all.

Let's start with the bad. Here in Germany, the federal government has introduced a rich, no-strings-attached clunkers program that is costing taxpayers a fortune and threatens to undermine any recovery in the auto sector next year.

Under Berlin's rules, owners with cars at least nine years old get 2,500 euros (about $4,000) for turning in a wreck and buying a new car, regardless of its size or fuel efficiency. That cash comes on top of any sweetheart deal the buyer cuts with dealers and auto makers.

As you can imagine, it's been a huge, huge success. New car sales in Germany are up 40 per cent from a year ago and sales haven't been this good since 1991.

But it's costing a fortune. When this clunker program arrived in January, Berlin envisioned spending 1.5 billion euros to get 600,000 clunkers off the road.

But with an election around the corner, the government raised the budget to 5.0 billion euros for two million cars and extended the deadline through the end of 2009. Vote buying, perhaps?

Now, European manufacturers are worried about what will happen when Germany's clunker program expires. And there are the same worries in France, Britain and elsewhere, where clunker programs have triggered a rise in sales.

"The (cash-for-clunkers) incentives have given us some breathing room and obviously we are worried about what happens when they end," Nissan Renault CEO Carlos Ghosn told www.just-auto, a British-based clearinghouse for auto industry news. "We are worried because we know it will have a negative impact. Hopefully, the economy will have improved enough by then so that the impact will not be too dramatic."

Most insiders believe the sales drop will be dramatic when the clunker cash disappears.

"It effectively transfers the downside risk from 2009 to 2010," David Arnold of Credit Suisse said in London. "They will not be able to simply end market incentivization -- it has to be done gradually." And even if done gently, once the handouts stop or shrivel, Arnold thinks European auto makers will see big drops in sales next year and perhaps beyond.

Before we get to Canada's program, let's consider what the Americans are doing. The U.S. Government is about to pass a cash-for-clunkers plan in part funded by a broad military spending bill. The legislation has already passed the House of Representatives and will likely become law soon.

The U.S. legislation allows consumers to use vehicle trade-in vouchers worth as much as US$4,500 to buy new vehicles. If fully enacted, the program could subsidize the purchase of 600,000 to one million vehicles and cost as much as US$4 billion. Lawmakers in the U.S. have set aside about US$1 billion for the program in a war-funding bill and the rest of the money could come from the U.S. economic-stimulus plan.

At least the U.S. program has a modest environmental element. Under the measure, clunker trade-ins would have to get no higher than 18 miles-per-gallon and have been built in 1984 or after. So the oldest, worst-polluting rattle traps are targeted for the wrecking yard and that's not a bad thing at all.

Then we have Canada. Our federal government also has a scrappage program and it's absurd. It neither works to stimulate the economy nor does it act as an effective environmental program aimed at getting the worst of the old, higher-polluting vehicles off the road.

Ottawa is offering $300 in the form of bus passes, bicycles or cash to the owners of pre-1996 vehicles who junk their rides. Some $92 million in tax dollars have been set aside for this. For the record, pre-'96 vehicles "produce 19 times more air pollutants than newer cars and trucks," according to the feds and other sources.

Of course, almost no one with an older car will take advantage of Ottawa's generosity. Why would anyone accept $300 or a bicycle to junk an old car worth ten times that in terms of a replacement cost? So Ottawa's $92 million is never going to get fully tapped.

Opponents of scrappage programs will say that's a good thing. They argue that scrappage programs don't really work very well as environmental initiatives. But they're wrong.

British Columbia's BC Scrap-it program (http://www.scrapit.ca/) takes an approach that gets it right on the environmental front -- and the economic one.

Dennis Ragoza, CEO of the program, certainly agrees that the $300 incentive is a non-starter with the public; it's just not enough.

He should know. BC Scrap-it administers the government's $300 scheme and since it was introduced on January 30 of this year, only a handful of people have taken the federal money in B.C.

On the other hands, BC Scrap-it, a provincial program, has been overwhelmed with interest. Why? Simple. The BC program offers up to $2,250 for polluting clunkers that are crushed and taken off the road.

The key point is that the payouts are based on the size of the greenhouse gas benefit. That is, the worst polluters are worth the most to owners who scrap them.

If your old car, when scrapped, offers a fairly low greenhouse gas reduction, then you get $750 applied to the purchase of a new vehicle. Medium benefit, $1,250 and high greenhouse gas benefit, $2,250.

Ragoza argues that the Scrap-it program was designed first as an environmental program, but the economic stimulus is just as real.

The B.C. program should be the model for Ottawa, but, of course, anything west of the Rockies is never taken seriously by the feds and their bureaucrats. Yet the B.C. plan can be defended as an enviro plan that also will give a jolt to the economy.

Why are the Conservatives in power ignoring a good, home-grown program from the province right next door to their Alberta power base? They're not considering a European or American model, are they?

Now that would be a disaster for Canada.