Common Tragedies

Thoughts on Environmental Economics

A Bit More on Cash-for-Clunkers

Posted by jab12004 on May 12, 2009

The WSJ ran an interesting article on the Cash-for-Clunkers program today.  Their general conclusion is that the program is mostly going to spur the sale of trucks.  I recommend you check it out

Here are a few of my favorite examples that illustrate how the program will probably function:

Say you owned a 2001 Dodge Ram four-wheel-drive pickup with a 5.9-liter engine. That truck has an EPA combined fuel economy of just 13 miles per gallon. Under the House proposal, you could scrap that vehicle and get up to $4,500 toward a truck weighing more than 6,000 pounds that got at least 15 miles per gallon. One that might qualify — depending on how weight is defined and measured — is a 2009 Dodge Ram 1500 four-wheel-drive pickup with a 5.7-liter V-8 and a combined 15 mpg.

There’s another way in which the House plan would help sell trucks. Someone who owns a big work truck — a van or pickup in the 8,500-to-10,000-pound weight class — built before the 2002 model year could get a $3,500 voucher for trading in that vehicle for a truck in the same or lower weight class. No mileage limits would apply, as trucks that big don’t have official EPA mileage ratings. In other words, a contractor who drives a Ford F250 could ditch the old one and get a new one, with the help of the Treasury.

The article makes a great point that due to CAFE standards, which haven’t increased much over the last 20 years, there aren’t many passenger cars which qualify.

To qualify for a scrappage voucher, the old car would have to get less than 18 miles per gallon. There aren’t that many “clunker” passenger cars on the road that are that thirsty on gas. You could drag in a 1987 Lincoln Town Car, if you happen to own one. (There’s one from that vintage for sale at a small used-car lot near my house.) But since passenger cars have had to measure up to a 27.5 miles-per-gallon fleet average for more than two decades, the few gas-guzzling sedans and coupes left are either pricey exotics or classic Detroit iron, neither of which are likely to be worth less than the $4,500 the government is offering.

This program basically is a cash subsidy to help automakers get rid of huge stocks of oversized pickup trucks.  There is nothing fundamentally wrong with that, just please don’t call it green and stick it in with climate legislation.

2 Responses to “A Bit More on Cash-for-Clunkers”

  1. Hydra said

    What if I want to trade my truck for a car?

  2. Eyal Morag said

    I just had exam on energy policy one Q to suggest policy for Israel. One of my suggestion was to limit the full consumption of all cars that can accelerate from 0 to 100 km/h =~ 62 mile/h in less then 15 sec. The rational is to leave out all the real trucks and buses and take of the road the sport “trucks”. If someone fill better in some monster no problem but he will be little slower on the road. I think 90% of all the “truck” owners will prefer the faster option.

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