More than one million cars a year are being scrapped without having pollutants such as oil, brake fluid and airbag gas canisters removed, because of a loophole in environmental regulations.
The End of Life Vehicle Regulations, which came into force in 2003, require cars to be stripped of all pollutants and recycled at licensed scrap yards.
However, Government figures reveal that only 900,000 certificates of destruction were issued to owners in 2006, even though more than two million cars were taken off the road.
A loophole in the DVLA's licensing system allows owners and unlicensed scrap merchants to deregister a car and avoid paying any more road tax without obtaining a certificate of destruction. They can do this by simply ticking a box on the V5 vehicle registration form.
That means unlicensed operators can remove the metal and other valuable scrap materials and dump the pollutants as untreated waste.
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said: 'We are very disappointed that the two Government agencies [the DVLA and Environment Agency] have failed to address this loophole.'
The DVLA said it is working to find a solution.