Common Tragedies

Thoughts on Environmental Economics

Cash for Clunkers, Turning Beaters into Value

Posted by jab12004 on May 6, 2009

For every good idea there are ten bad ones, and this seems to be one of the bad ones.  The program is just like it sounds.  Turn in your used car; get $3,500 – $4,500 towards a new, fuel efficient one.

Rich put it in perspective by saying that it clearly isn’t an environmental program, it’s an auto subsidy.  But still, seriously???  If we are interested in promoting the purchase of new autos, the government should provide an across the board credit for purchasing a new car.  All Cash for Clunkers does is greenwash an auto subsidy and put it under the climate umbrella.  It also ads a number of strange quarks to what might have been a straightforward auto credit.

Let’s think some reasons that cash for clunkers is a bad idea for an environmental (or economic) perspective

1.  There is no way to know how much someone drives the car they turn in.  I could bring in my 1975 Gremlin which has sat in my front yard collecting rust for the last few years.  As long as I can drive it to trade it in, I get the credit.  Basically, having an old beater gives you a free credit.  In the end a family might end up driving more since they now have more cars than they previously did.

2.  Building a new car generates around 6.7 tons of CO2 emissions according to a duke’s Bill Chameides.   He estimates that it would take at least 5 years to offset this with the new vehicles lower MPG.  This increases to almost 20 years if the new car is an SUV.  This of course assumes that people drove their old cars as much as they drive their new cars.  If they didnt’ drive their old cars it will take a LONG time to offset the zero emissions they gave off.

3. A SUV which has at least 18 MPG (sticker, not actual MPG) gets a voucher (WSJ).

4. Democrats want to potentially fold this into the larger energy bill, “unless [the] measure becomes hopelessly entangled in policy disputes (NY times).”  Adding provisions like this is exactly how a large energy bill is not going to pass.

5.  This is the sort of thing Stavins was trying to warn against…don’t cook dinner and eat in the shower at the same time.  Remember?

I guess we have to give the compromise some credit for not including a “buy American” or flex fuel provision.

3 Responses to “Cash for Clunkers, Turning Beaters into Value”

  1. dWj said

    And, of course, the time-consistency issue; if the government seems to be making a habit of this sort of thing, the sort of car that might be eligible for this kind of trade-in program five years from now becomes more attractive to consumers.

    Your last sentence, though, that’s a silver lining that hadn’t occurred to me. Congress isn’t yet so bad that one can’t imagine it having been worse.

  2. Hydra said

    Germany has a cash for clunkers program that seems to have worked. Exept they are scrapping the clunkers and this has dried up the availablilty of good used german cars in places lie Lithuania and BeloRuss.

  3. It’s also a total non-stimulus for anyone with a reasonably efficient vehicle. Only passenger cars with ratings less than 18mpg will earn a credit. Millions of consumers are driving older vehicles that they would be happy to part with for a subsidy, but apparently their vehicles are “too green”. Quite ironic.

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