Cash for Clunkers: Is the policy the real clunker?
The U.S. Congress just put another US$2 billion into the popular Cash for Clunkers program.
The Cars Allowance Rebate System (CARS), which has been dubbed “Cash for Clunkers,” has been so popular in the US that the $1 billion allocated for the program ran out in just a week, three months ahead of schedule. The $2 billion extension will let car owners trade in old fuel-inefficient cars for $3,500 to $4,500 until September 1.
This week, the Transportation Department released data showing that more than 184,000 cars had been traded in, with the Toyota Corolla as the best-selling new car under the clunker program.
Cash for Clunkers requires car dealerships to shred the old, gas-guzzling auto traded in for the rebate. The idea is two-fold. The Federal government aims to inject cash into the economy to help improve consumer spending. The government also wants to get polluting cars off the road. However, the program’s supposed environmental features are drawing criticism.
First and foremost, one tenet of the green movement is to reuse and recycle. However, the clunker program is shredding perfectly good cars as scrap metal. The justification for destroying the cars is that getting them off the road will lead to fewer greenhouse gas emissions. This justification is unfounded, because the program hardly makes an impact on US carbon emissions.
One article claims that the clunker program’s impact is a “blip,” equivalent to shutting down the entire US, including cars, factories, and power plants, for 3 hours in a year. Reuters estimates that the total $3 billion in rebates would reduce America’s daily oil consumption by 0.05 percent. William Chameides, Dean of Duke University’s Nicholas School for the Environment, states that manufacturing a new car produces an average of 6.7 tons per vehicle. The average new car would therefore need to save about 700 gallons of gas to offset the carbon costs of its manufacturing, which could take five to 10 years. Another article explains that the $2 billion used to fund the program’s extension is one third of all the stimulus funds allocated to the Department of Energy to fund start-ups that build lightweight wind turbines, design new ways to store energy on electric grids, and create cheap solar panels for rooftops. The $4 billion remaining with the Department of Energy has already been promised to certain programs.
The issue is complicated. In the US, petroleum use accounts for 44 percent of carbon emissions, while natural gas and coal create the remaining 56 percent (Energy Information Administration 2006). So, the decision to reduce vehicle carbon emissions or change the composition of energy use and electrical generation (like installing wind turbines and solar panels) is a toss up, other things being equal. If the clunkers program takes in 250,000 cars with an average of 69 percent improvement in fuel efficiency, as some estimates suggest, then the program would lower fuel consumption by about 76 million gallons or 738,000 tons of carbon dioxide annually, minus the 1.7 million tons of carbon dioxide required to manufacture the new cars. To reduce carbon emissions by 738,000 tons annually in the US, we could make 60,924 Southwestern homes off-grid by installing solar panels. Or, we could “turn off” 14 percent of a coal-fired power plant. This really puts the program in perspective – getting rid of one coal power plant would be over 7 times more effective at reducing greenhouse gas emissions!!!
Even from an economic perspective, the program makes little sense. NPR interviewed Jeremy Anwyl, the CEO of the car research site Edmunds.com. He argues that the Cash for Clunker program really attracted people who were going to trade in their car anyway, and has not created new demand.
Surely for $3 billion we could be doing something better. If we can’t build wind turbines or solar panels, perhaps we could have a Cash for Transit?