Cash, Clunkers and the Environment
Commentors on last week's post on Cash for Clunkers have argued that the newly-expanded program is better than other government subsidies because of its positive environmental effects. So I did a little research and it turns out that the “green” benefits of this program may be wildly overblown.
There was a nice summary of these modest environmental outcomes in Sunday’s Washington Post by researchers Lee Schipper, Joel Mehler, Brian Gould, and Chris Ganson. They, and others, conclude that the net benefits of the Clunkers program are very small.
It is true that, so far, cars turned in under the program got slightly fewer miles per gallon than the typical aged vehicle, and the vehicles purchased under the program are about 10 percent more efficient than the typical auto bought this year. This is a good thing.
However, as my colleague Bob Williams and others have noted, new cars are driven more than old cars. A lot more. On average, the Post piece notes, a new car is driven 25 percent more than a 10-year-old vehicle, and twice as much as a 14-year old clunker. This is not such a good thing.
So, new cars get better miles per gallon, but because they are driven much more, they drink almost as many gallons. Net net, according to Schipper and friends, the program will reduce CO2 emissions by a barely measurable 0.04 percent.
Others have noted the environmental cost of building new cars and suggested that, if clean transportation was the real goal of the program, it would encourage purchase of late model energy-efficient used cars as well. But they are not eligible.
Finally, the program both rewards owners of energy inefficient cars and buyers of relative gas guzzlers. Rather than tie the subsidy to the fuel efficiency of the new car, which would make the most sense, the program instead links it to the new car’s increase in MPG relative the old vehicle. And it subsidizes even smaller marginal improvements for SUVs, vans, and pickups than for passenger cars, encouraging the purchase of these oversized gas guzzlers.
For instance, a new passenger car is eligible for the full $4,500 credit only if its mileage is at least 10 MPG better than the clunker. But an SUV can get the full credit if it gets just 2 MPG better than the traded-in car. No program with a true green focus would be designed this way.
Bottom line: Trading in clunkers for new cars may slightly reduce pollution. But the program is far from the most environmentally efficient way to spend $3 billion. Let’s face it, this program is overwhelmingly about buying new cars, not reducing greenhouse gases.
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Driving Lessons Coventry
That's absolutely not my business but how do u want to take a part in Washington here?
I think from one perspective the cash for clunkers program was good as it got old polluting cars off the road and did generate some sales for a struggling auto industry. But on the other hand it got a lot of people that had no business buying a new car behind the wheel and now if you look at the numbers in most major cities repos are going way up.
I think you overlook another “positive externality,”–the change in mentality of car buyers. Cash for Clunkers is finally a shift in consumer behavior, incorproating the full cost of buying a car, not just the fixed cost, but the variable cost of driving, i.e. gasoline prices. As this is immeasurable, it is also invaluable.
I'll concede the point, however it is still good stimulus – especially since the profit goes in part to the United States for at least those cars made by Chrysler and GM when the dealers put in orders for new cars.