Common Tragedies

Thoughts on Environmental Economics

let’s get rid of used cars?

Posted by Rich Sweeney on February 23, 2008

Regular CT commenter and friend Tmoney often sends me interesting links and ideas. Today he sent me a policy idea in response to this article from the LA Times and thought I’d share it with y’all. I’m running out the door now but will think about this some more and post my thoughts in the comments later. I encourage you to do the same.

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here’s an interesting policy idea.

used cars tend to be big, gas chuggers, less safe than new cars (all else equal), and with lower quality combustion (leading to more nox, pm, etc). additionally, the market for used cars gives the marginal car buyer an alternative to newer, safer, cleaner, and more efficient new cars. finally, used cars don’t create manufacturing jobs.

is there a role for government intervention here? policy makers want cleaner air, manufacturing jobs, less oil consumption, and auto accidents with fewer injuries. replacing older cars with newer ones tend to acchieve these goals. why not offer some sort of incentive to owners of older cars to have them destroyed instead of being used. I wonder what the combined public benefits of scrapping an older car are relative to continuing to drive it.

in practice, how would this work? lets say Bob owns an older suv. it has a trade-in value of say, $2k. instead of getting $2k from the dealer for it (and having the dealer subsequently re-sell it in the US or mexico), why not have the government buy it and scrap it? the costs to the government are $2k (or so). the benefits are the market value of the scrap steel + the environmental benefits + the public health benefits (higher quality emissions, less emissions, and safer vehicles leading to lower costs). given that its not easy to capture the last 2 pieces (financially), you’d need a way to pay for this. gas taxes come to mind, as well has vehicle registration fees. with the $2k, bob buys a newer car that is hopefully safer and more efficient. society consumes less oil, emissions go down, and bob is less likely to be seriously injured in a car accident.

I know amory lovins has proposed this before, but I wonder if there’s something politically feasible and economically rational that would work.

thoughts?

-tmoney

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20 Responses to “let’s get rid of used cars?”

  1. T.S. said

    You’d have to account for the additional energy and assorted environmental costs associated with the increased manufacturing of new cars, and perhaps those associated with disposal. Besides, what about those who need cars but can’t afford much (public transit, let’s face it, isn’t a panacea), or first-time drivers who are likely to wreck them anyway? US regulations and consumer preferences that heavily disfavor really small cars no matter how cheap they are make that option unworkable. I don’t like this incursion on personal freedom a bit.

  2. Rich Sweeney said

    yeah it seems to me like this policy would be much too regressive. you’d either price poorer people out of the market or force them to spend a much higher portion of their income in order to get to work etc. I do agree that some old cars would be best taken off the road, but think we could target those explicitly with regulations or more targeted buybacks. Let’s not lump used Jetta’s and used Gran Torino’s together just yet.

  3. DK said

    Here’s how it works:
    California Vehicle Retirement Program
    In California, they give $1000 to you to retire your car, regardless of the market value, if it fails the bi-annual smog test. Alternatively, they also give consumer assistance to repair the car if you’re income eligible. I did it a few years ago when I was in California, when they were just offering $500. My 1980 Toyota Corolla with 250+ thousand miles was listed as a “gross polluter.” Since the car was falling apart anyway, I submitted the paperwork and got approval to take it to a state approved scrap yard. There are some additional requirements for the car: it has all doors, a windshield, can drive under its own power, starts on demand. I drove to the scrap yard on surface streets on a spare donut, with the hood lashed down by a chain. Fortunately it was a bit of a drive and it gave my battery enough juice to start the engine on demand; I had to jump it after having parked it overnight. Once it’s verified that you scrapped the car, you get a check in the mail.

  4. phaedrus said

    I have read that about 1/2 of a cars lifetime GHG come from their production and destruction, hence such a policy would likely be worse for the environment overall. As well, the ‘so-called manufacturing jobs cited above would be akin to the ‘broken-window fallacy in that the jobs created producing a unnecessary car would take jobs away from other jobs that would actually add value to the economy, including ‘green-collar’ jobs. (besides, most auto-manufacturing jobs are overseas now anyway)

  5. Ricardo Troncoso said

    As far as I know there has been a lot of scrappage or accelerated vehicle-retirement programs in the last 10-13 years. Countries like Canada, France, Japan, Australia, USA, among others. Also there are many papers about them, paper about how they work, about valuating the impact from emissions reductions and about evaluating the overall results. For some references you can search for Anna Alberini’s work, also Robert Hahn and Jennifer Lynn Dill, but as I said before there’s a lot of work on the subject.

    Anyhow, what I think is that they are good alternatives to retire old polluting vehicles from the road and also to push technological innovation and the creation of recycling industry in those countries where it doesn’t exist.

    Nowadays the main issue with vehicles is their energy efficiency, strongly related with Greenhouse gas emissions. A five-six years old car produces ten times more HC than new cars and four time more CO2 because incomplete combustion. Also the expected lifetime of a new car is around 10 years so it seems natural to think about scrapping them.

    Finally, about the article about used cars going to Mexico I really think that’s a very bad way to get rid of them. USA might be solving a short run problem, but they will still contribute to global warming. I do believe governments should try to come out with programs like this. The way I see it, benefits are a lot higher than costs.

  6. Jersey said

    No…get rid of the junkers and trashed-up looking ones. (You know, the ones with plastic-wrap like stuff for windows.) I can’t even afford a new car. Or, give us poor something heavily subsidized…like what the government is doing with the analog tv digital signal converter box things.

  7. The Dom said

    You must be out of your mind. In your perfect “idea on paper” it sounds…OK. You are obviously a liberal environmentalist (and not really a smart one)…”government intervention”…that’s just what we need. More government “intervention” in our lives. And where do you suppose the money is going to come from to buy all these cars? I’ll take a stab…higher taxes! And what type of machinery do you suppose will be used to destroy the millions (if not billions) of these used cars? You can bet your shirt that they won’t be fueled by ethanol! Need I mention that a lot of people cannot or certainly do not want to afford a new car? I can afford many new cars, but simply do not want to lose the 25% or more value after I drive it off the lot…but what is resale value to you anyway? I’m sure the government’s intervention will offer me “top dollar” for my “trade”. The pure economics of this alone do not make any sense. The other thing that doesn’t make sense is me wasting so much time trying to make sense of this leftist nonsense.

  8. jeremy said

    I love how angry you got there Dom, makes me not want to listen.

    This article brings up an interesting question though. How can we get rid of the innefficient junkers, in a way that is environmentally sound and economically sound as well?

    (let artists live in them).

  9. Mersedes said

    I agree with the points made by The Dom, but also how would the program define “used cars”? The dividing line between used car and old car is a blurry one, and while car enthusiasts might me in the minority, one cannot completely discount the fact that many people are very attached to their vehicles.
    Take into account roadsters, muscle cars, hot rods, classic cars; while these cars are not as environmentally friendly as new cars (obviously), they cannot be stripped away from their proud owners.
    So yes, perhaps offer an incentive for individuals to retire their “used” non-efficient cars (which I am pretty sure these programs are already in effect), but a government program deciding which cars stay and which go infringes on the general autonomy and rights of Americans. Yes I am a libertarian, but the government does not belong in every aspect of my life, especially breathing down my neck because I drive a 68 Camaro.

  10. jgammeter said

    If you where to do away with all used cars it would be awful, despite the issues it would cost poorer people, it would also take away a bit of our own culture. old things don’t need to be destroyed they need to be preserved (with the exception of most cars in the 1980′s)

    If you really wanted to help the environment put a limit on the size engine people can make, if you have a 4cyl 2.5L car with a turbo thats fast enough for anyone, and should be able to provide enough torque even for truck applications. The biggest issue as far as i can see is SUV’s, because theres not many that get over 20 MPG.

  11. Michael said

    I agree with Jgammeter on his first comment. Toyota Supra Turbo cars will get close to 30mpg with an aftermarket fuel computer ($600 for a basic piggyback, and $3k for a full stand alone).

    The car is more enjoyable all around than a comparable hybrid or scion. Rides like a Lexus, great acoustics, very fast, targa top…and cost roughly the same or less.

    No need to throw away perfectly good cars, when simple maintenance and minor upgrades will have a great effect for the environment than just throwing them away and buying new.

    On his second claim, remember, people rarely drive the speed limit when left to themselves, any 4 cylinder will have less gas milage than an equally powerful higher displacement/greater cylinder count engine under the same acceleration/cruise conditions.

    A 2003 corvette automatic will get better gas milage going 90 down the highway than a 2006 scion xB with its 1.6 litre 4 cylinder.

    A ’68 Camaro with a basic small block and EFI is better in a macro sense for the environment than new Hybrid technology. Counting the disposal, maintenance and manufacturing costs of a Hybrid, a simple oldschool muscle car with “newer tech” is probably the best thing for the environment.

    And I dont know about you, but I’d much rather roll a vintage Camaro than a jelly bean looking Hybrid thing anyday.

    oh well…politics…

  12. 5tein said

    “Ending is better than mending”

  13. You must be kidding, or out of your mind.

  14. Mersedes said

    Both, that and never have owned a car like that. I know off topic, but after my Camaro, new cars just do not do anything for me.

    As far as my Camaro competing with new hybrids and other eco-conscious cars…I do not know about that. I mean I obviously do routine maintenance, but my car is completely stock and has pretty bad fuel mileage street and city.

    As for speed limits, no people do not observe them. Especially not in Los Angeles. 80 is generally the minimum on the freeways I drive, which does put the small engines and hybrids in a different category. They were not made for hardcore power and speed, which is how many people drive. So yes, the hybrid and 4 cylinders win short distance, city, and average speeds, but realistically people’s driving habits have to be taken into account, like do the drivers accelerate quickly and brake hard or coast at lights? Many factors contribute to MPGs, factors that are generally averaged out or completely not accounted for in factory testing.

    Basically, I agree with Michael, except I think you give my car a little too much credit.

    Either way, most people could not afford a new car simply with the money they would get for “retiring” their “used” cars, so the “old” car point that I brought up is mute. Struck a nerve though.

  15. The Dom said

    OK, so I got a little angry. It must have been all the Bill O’Reily and Rush Limbaugh I have been listening to coming through…I appologize for my online attitude, as immature or as ranting as it was, but my feelings stand!

  16. Pete said

    I recently traded in my very new gas hungry SUV for an “old” (1992) Honda civic. Saved a ton of money on car payments (now I don’t have one) and more than doubled my MPG, saving me another $50+ per month on fuel. I’m getting pretty close to Prius MPG for around $20,000 less.

    Clearly this type of policy would have to be mired in red tape to be effective, but then it wouldn’t be effective would it? Incentives to trade for a more efficient vehicle? Maybe yes. This would require some serious valuation work to find the right subsidy. Command and control approach banning this or that? Definitely no.

  17. DK said

    Sure, and next you’re going to propose taking away my civil war musket and gun powder and trying to upgrade me to a colt .45 with a safety lock because you think it might be safer. You damn tree-hugging liberals. Think about the regressive effects of that policy when poor urban youth can’t buy new automatic weapons at gun shows because you’ve given them all away to true collectors of classic arms who were forced to turn in their rifles. Ever heard of the Second Amendment? You’ll have to pry those guns from my cold, dead hands.

    Get a grip commenters, nobody’s taking away your car; these programs are voluntary. You trade it in because it’s such a gross polluter that it can’t pass a smog test, and you can’t register it anyway without getting it repaired. Since the worst 10-30% of cars cause most of the pollution, they’re not talking about your supra with aftermarket computer. It helps businesses and the states because they can reduce the biggest sources of ground level ozone at the cheapest cost (cheaper than retrofitting that company’s smokestack). It reduces the health effects (cancer, asthma, etc.) and other externalities. The programs have mechanisms in place to try to reduce gaming the system (e.g., requiring that you’ve owned the car for more than 1 year, and that it’s drivable). The costs are paid for by car registrations for new cars that aren’t required to pay for smog tests (but they could be paid for by the polluting companies like Unocal did back in 1992). There are mechanisms to work against the regressive nature of the programs, such as vehicle repair assistance. And there’s already been plenty of research and modeling on the emissions from different classes and ages of cars. In terms of red tape and paperwork it’s a four step process 1) fail smog test, 2) submit paperwork to state, 3) take car to approved scrap yard, 4) get check in the mail.

  18. Matt said

    I think the problem is not people willing to participate in a program like this, it is actually getting the government to actually come up with a sensible program and implement it.

  19. [...] Find more about it all here [...]

  20. Bull-SNOT said

    BIG GOVERNMENT IS NEVER THE ANSWER. Unless the question is how to keep the poeple opressed.

    Why should fred the car lover, (once and still an american past time) not be allowed to own what HE considers a classic vehicle simply because 99% of the rest of the world does not?

    we are NOT a democracy. we are a REPUBLIC.

    we DID NOT build a country where 51% can control 49% or 99% control 1%.

    THATS NOT FREEDOM!

    and if you havent noticed, we are not only NOT a democracy, we have become a dictatorship.

    when everything is illegal, nothing is illegal.

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