From Brookings comes a policy proposal that steals my heart: the melodically-named Cash For Clunkers. Here’s the low-down:
The incoming administration needs to act quickly to stimulate our ailing economy, prevent the collapse of the auto industry and tackle climate change and oil dependence. One policy idea might simultaneously rev up the engine on all three challenges—cash for clunkers.
Offering cash vouchers to clunker owners in exchange for their old, polluting cars is an idea that should be getting more attention. Drivers could use the vouchers toward the purchase of newer, more fuel-efficient vehicles, with the old vehicles scrapped to get them off the road.
If that sounds like a peculiar idea to lionize, consider the potential benefits. Older cars tend to be dirtier and less efficient, so getting them off the road can reduce gasoline consumption and carbon emissions as well as improve local air quality. (Or you could imagine tweaking the program to focus only on older cars that are serious gas guzzlers.) If the vouchers were good only for relatively efficient new vehicles, we would essentially guarantee fleet improvements. Plus, clunkers also tend to be less safe, so there could be an important public health benefit as well.
The idea really isn’t too odd. In fact, in energy efficiency circles this sort of thing is actually rather pedestrian. (Sorry.) Leading utilities already operate old-appliance buy-back programs, for example, in order to reduce wasteful and expensive electricity consumption even while giving low-income consumers a helping hand.
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That’s not to say that buying new cars for people is a long-term solution to our energy, climate, and economic problems. Obviously, it’s not. Indeed, such a policy could only ever be a first step. But coupled with a range of other policies—comprehensive carbon pricing, new investments in car-light infrastructure, and large-scale green jobs programs — a cash for clunkers program might be just the tonic we need in the short term.
Brookings takes a line that I’ve long touted. Strategic energy and climate policy will target the easy stuff first, to buy us time to figure out how to do the harder stuff.
Getting the most fuel-inefficient vehicles off the road can also be a particularly effective way to reduce gasoline consumption in the short term. Consider that if two people drive the same number of miles, the one who switches from an SUV that gets 10 miles-per-gallon to one that gets 12 will actually save more gasoline than the person who switches from a sedan that gets 30 miles-per-gallon to a hybrid that gets 50.
What really matters is gallons-per-mile, not the more common measurement of miles-per-gallon. If both drive 300 miles, the SUV driver will use 25 gallons rather than 30, thus saving 5. But the sedan driver will use 6 gallons rather than 10, thus saving only 4. In the long run, we are going to need much more fuel-efficient cars. But targeting the worst offenders provides more benefit than many realize.
So I like the idea. But it strikes me that there is an important way to improve on the Brookings proposal. Instead of offering a voucher good for a new car, we could offer a higher-value voucher not to buy another car at all. If the new car voucher would be worth $2,000, we might instead provide $2,500 worth of bus passes or cab rides or car-sharing service or what have you. This isn’t too far-fetched. In fact, the city of Seattle already offers such a program: the gramatically-challenged One Less Car Challenge. So does British Columbia with its super-popular Scrap-It Program.
My modification leaves plenty of details to sort out, of course, but the basic idea might still work. Owners of older and less efficient cars (largely lower-income folks) would have a cash incentive to start saving money on transportation costs—a plan that would save the most wasteful carbon emissions to boot. Granted, the money from my program wouldn’t flow through to the automakers, as the Brookings proposal imagines, but the money would still get injected back into the economy, much as other stimulus proposals have suggested.
h/t to Todd Wildermuth
Update, 1/28/09: The Financial Timesreports that a similar program in Germany is going gangbusters.