The stats from the Cash-for-Clunkers program sound so promising: more than 690,000 gas guzzlers taken off the road in exchange for more fuel-efficient models. About 84 percent of the trade-ins were trucks, while 59 percent of the new purchases were cars, according to Consumer Reports. The top three vehicles scrapped:
- Ford Explorer 4WD
- Ford F150 Pickup 2WD
- Jeep Grand Cherokee 4WD
In exchange for:
- Toyota Corolla
- Honda Civic
- Ford Focus
This had to be a big win for the environment, no? Well…not really, especially if you were hoping for a cost-effective win. University of California Davis transportation economist Christopher Knittel ran the numbers:
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- Miles per gallon for the vehicles being scrapped: 16.3 (Consumer Reports put the latest numbers at 15.8, but it’s still close)
- MPG for the new cars: 24.8
- Assumed miles driven per year for each: 12,000
- Gallons of gas saved per year: 270
- Tons of carbon dioxide saved per year: 2.7
Assuming that the clunker would have been on the road for five more years, and given that the average rebate was $4,200, plus giving some value to the non-CO2 pollutants that are removed by the more efficient new cars, the price per ton of CO2 not released to the environment: $237.
By comparison, the price of CO2 on the European trading market is about $22 a ton right now.
And that’s Knittel’s best case scenario (see more on how he calculated these figures in this paper, published by the University of California Energy Institute). In reality, many of the clunkers likely weren’t being driven that much before they were scrapped, the new cars could be driven even farther given their better mileage and delightful newness, and the life of the trade-ins is more likely three or four years, not five. The actual price per ton could be closer to $500. That could buy a lot of saved trees or weather-proofed windows.
Which isn’t to say that swapping 16 mpg vehicles for 25 mpg ones isn’t a good thing. As one of my colleagues pointed out in an early blog post, you do get some real bang for those bucks. And of course the prime purpose of the $2.88 billion Cash-for-Clunkers program was to sell cars, and it sure did that.
Note: The original blog post was updated at 3 p.m. on Aug. 26 with final Cash-for-Clunkers sales totals.
Clunker photo courtesy of Flickr user ThreadedThoughtsunder the Creative Commons license.
* A Nation of No Losers *We do not let you be a loser!Your mistakes will be rewarded handsomely.When you bought a clunker that you should not have, we give you $4,500.When you bought a mansion that you cannot afford, we’re going to bail you out.When you bought any inefficient appliance or anything, we’ll pay you no matter how old they are.When you lost your job, we extend your benefit.When you do not have saving, we give you free health care.When you have saving or a job, we take away your health care.Teenagers, the more babies you have, the more benefits you have.Drunk drivers, no one will prosecute you as the entire jury and even the judge are drunk.Old ladies, your driver’s license is also a license to kill.Black kids, special pass to go to college and jobs.Fatsos, do not worry as our up-coming drugs will melt all your fat while you sleep.All athletes are rewarded with millions for taking drugs.We voice loudly and disapprovingly on foreign athletes doing same.It is an America invention!When you cheated billions, you can retire in a resort-like ‘prison’.Also, the billions your wife hid is hers – no questions asked.No other country lets their citizens own guns.NRA and his puppet politicians will give you millions of funny ‘reasons’.When your company fails, we bail it out.The executives are rewarded with bailout money for bringing down a company.You die penniless, we give you $500.You die with millions, we share your wealth.The small catch.We need you to re-elect us in 4 years.The children cannot vote today, so let’s pass our debts to them.China does not have a voice here, so let’s pass all the blames to them.
I’m pleased to see that the mpg improved by 10, that’s higher than the minimum they set in the program… but you’re right, I guess the point wasn’t primarily to get carbon out of the air, it was to help the economy.
Uncle Vinny,Yep. Unfortunately, there’s plenty of reason to believe that cash for clunkers is a bad economic stimulus investment. Just as it’s a bad pollution prevention investment. Spending on most other consumer goods have much better “bang for the buck” in terms of job creation, for example.
I think when we consider whether this was good value we have to bear in mind that this money was probably going to be spent on the car industry anyway. So if we at least got some fuel efficiency gains, perhaps we should be grateful for that.That said, Alan has a point: how much genuine new demand did this stimulate, as opposed to merely pulling purchases forward by a year?
I think of Cash for Clunkers as primarily a *targeted* stimulus program—that is, it was designed to specifically help the car industry & auto dealerships, rather than the economy as a whole. From what I’ve read, ANYTHING that helps sell cars is a bad general stimulus investment, since car sales don’t generate a lot of jobs per dollar of auto industry revenue. For a general stimulus, it’s better to buy an average basket of goods and services; and better still to give money to things that have higher-than-average multipliers for jobs and money velocity.That said, if you are going to give $$ to the auto industry (and I don’t count that as an automatically awful idea, since Detroit’s in such a slump) this isn’t such a bad way to do it, I suppose.
I just saw an article about “cash for appliances”:http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/29/BU6D19F7V0.DTL=1Do we think that program will have a better ROI?
Clark’s point is on target; this was a targeted stimulus.There are lots of stories yet to emerge as dealers work through the inventory of clunkers and market forces adjust to the impacted used car inventory, the accelerated purchases or whatever turns out to have happened, and the lessons learned about buyer behaviors.Those primarily concerned about carbon should sit back slightly. Call this program the positive that it is. Key people of all stripes talked about environmental and economic benefits. Claim credit for the positive benefits that can flow from it, and look to other program ideas where this concept could be applied such as gas and electric appliances, anything with a small gas engine, etc.This idea originated in Europe, and it was actually implemented here in the United States of America. That’s big in itself. Take great pride in the simple fact that this program happened. Build on it.
As has been mentioned before, the main justification for this program is to give the auto industry a boost. If it’ll help folks in depressed areas like Detroit and Flint, I’m fine with that – they are really suffering right now. The fuel economy improvement is a nice bonus, but I don’t think that was Obama’s main goal. But, at least he’s looking for ways to help the economy that also help the environment.
I read through your calculations three times, and I don’t get it. You’re valuing the saved gasoline, 1350 gallons over five years, at zero dollars?Where I come from, gas costs $3 per gallon, not zero. Let’s just say it costs $3.11 per gallon, in today’s dollars, over the next five years (a very low estimate, I would guess). 1350 gallons, at $3.11 per gallon, is $4200. In other words, the $4200 completely covers your gas savings, and the carbon reduction comes at a total cost of $0 per ton. Zero. I’d say that looks like a pretty good deal, climate-wise.Caveat: I did not account for embodied energy of the new cars or the old cars. If we assume that people were going to buy new cars anyway and that this program just pushed their purchases (a) sooner and (b) toward a smaller car, then (a) is pretty much a wash and (b) is another climate win.