Recycling contributes significantly to the natural resources preservation. However since recycling technology at the same time requires primary materials and energy input, both contributing to the natural resources depletion, it is important to evaluate the resource efficiency of the whole recycling chain to determine the actual benefit of recycling. For such an evaluation exergy analysis can be used by calculation of the exergy efficiency as an indicator for the resource efficiency of the recycling chain. In this paper exergy analysis is added as a metric to the fundamental recycling system optimisation model developed previously by the authors. This addition allows evaluation and optimisation of the recycling system environmental performance on a fundamental basis, capturing exergy efficiency in the system as a function of physical, metallurgical and thermal processing and the quality of recyclates. Several car recycling scenarios have been evaluated using the fundamental recycling system optimisation model. The results reveal the influence of legislatively required recycling/recovery quotas and recycling system architecture on the environmental benefits of recycling. The results suggest that legislation does not represent the best exergy and resource efficiency of the system supporting the view that the present stringent legislation for end-of-life vehicle recycling is violating fundamental thermodynamics. (c) 2007 Elsevier Ltd. All rights reserved.