Writ large, old cars are less fuel efficient and more polluting. Getting "clunkers" off the road can lead to many improvements. These improvements can be environmental, economic, energy, and even safety. "Cash for Clunker" programs are, in essence, subsidized scrappage programs that provide government incentives to, hopefully, achieve all of these objectives.
If done right, cash for clunker deals can help make real improvements across a wide range of fronts, as mentioned, speeding modernization of auto fleets and introduction of greater efficiency (and other desired auto characteristics, like better safety features and handling) into the buying structure.
Amid the economic crisis, many nations have been looking to similar programs. That includes the United States.
Germany's $3200 per clunker exchanged as part of a new car has received credit for a boost in auto sales, with some 134,000 applicants for the cash in the program's first five weeks. Notably, as part of the deal, the 'clunker' must be at least nine years old and the new car must meet Germany's strict emissions standards. (See this Der Spiegel article for 'lessons learned'.)
American Progress proposed $7.5 billion for a Cash for Clunkers program last year, highlighting the polluting and economic impact of old, inefficient vehicles.
Cars that are over 12 years old account for only 25 percent of miles driven nationally, but produce 75 percent of all vehicle pollution, and are 10 to 30 times more polluting than newer models. And when gas prices rise, Americans driving these older, less-efficient vehicles are the most acutely affected—straining household budgets, reducing consumer spending on other goods and services, and exacerbating the slowdown in the economy.
Done right, a Cash for Clunkers would:
- Provide significant job retention and stimulus to whatever is left of the auto industry
- Significantly reduce emissions of both GHG and smog-related pollution
- Reduce oil usage and significantly increase the efficiency of the US auto fleet
- Move a large segment of car owners from older vehicles to safer, newer models with airbags and other safety features.
So, what is the 'agreed' program that looks to be moving forward?
The one-year plan crafted by members of the U.S. House of Representatives would offer vouchers worth up to $4,500 for owners to replace their less fuel efficient vehicles for models that get better gas mileage. The goal of the "cash for clunkers" legislation is to sell 1 million vehicles. "By stimulating consumer demand for new vehicles, this proposal will directly benefit domestic autoworkers and automotive manufacturers, which have arguably been hardest hit by the current economic downturn," said Rep. John Dingell, a Michigan Democrat and staunch industry ally.
Economic, environmental, energy, and safety ...
Seems that Dingell only sees only that first benefit.
Rep. Edward J. Markey (D-Mass.), Chairman of the Energy and Environment Subcommittee commented that
"This deal is a triple play for our country," said Rep. Markey. "Consumers can trade in their old gas-guzzlers for a new, more efficient vehicle, we can reduce our dangerous dependence on imported oil, and help the struggling American auto industry get back on its feet. This deal is about saving American consumers money both at the pump and at the dealership."
Representative Markey, compared to Dingell, expresses a far more expansive vision of the proposal's opportunities.
Chairman Markey suggested that this Cash for Clunkers provides a window on what can be done in the House of Representatives in other domains.
"As with most compromises, this one took a great deal of work and time, and I salute my Colleagues – Ms. Sutton, Mr. Inslee, Mr. Stupak, Mr. Dingell, and of course Chairman Waxman, for all their leadership. I also want to thank the President for his support and White House assistance as we worked through the details." "This deal also demonstrates how Representatives from both coasts and the Rust Belt can reach agreement on difficult issues, and I expect more of the same as we continue to negotiate comprehensive energy and climate legislation."
This is somewhat concerning as, sadly, the actual compromise doesn't look like something worth much cheering. It does not look structured to achieve the multi-faceted win-win-win-win elements of a smart Cash for Clunkers.
What is the deal?
<h2>"Cash for Clunkers" Agreement</h2>
Consumers may trade in their old, gas-guzzling vehicles and receive vouchers worth up to $4,500 to help pay for new, more fuel efficient cars and trucks. The program will be authorized for up to one year and provide for approximately one million new car or truck purchases. The agreement divides these new cars and trucks into four categories. All mpg below relate to the values displayed on new vehicle window stickers.
Passenger Cars: The old vehicle must get less than 18 mpg. New passenger cars with mileage of at least 22 mpg are eligible for vouchers. If the mileage of the new car is at least 4 mpg higher than the old vehicle, the voucher will be worth $3,500. If the mileage of the new car is at least 10 mpg higher than the old vehicle, the voucher will be worth $4,500.
Small Trucks (and SUVs): The old vehicle must get less than 18 mpg. New small trucks or SUVs with mileage of at least 18 mpg are eligible for vouchers. If the mileage of the new truck or SUV is at least 2 mpg higher than the old vehicle, the voucher will be worth $3,500. If the mileage of the new truck or SUV is at least 5 mpg higher than the old vehicle, the voucher will be worth $4,500.
Large Light-Duty Trucks: The old vehicle must get less than 18 mpg. New large trucks (pick-ups and vans weighing between 6,000 and 8,500 pounds) with mileage of at least 15 mpg are eligible for vouchers. If the mileage of the new truck is at least 1 mpg higher than the old truck, the voucher will be worth $3,500. If the mileage of the new truck is at least 2 mpg higher than the old truck, the voucher will be worth $4,500.
Work Trucks: Under the agreement, consumers can trade in a pre-2002 work truck (defined as a pick-up truck or cargo van weighing from 8,500-10,000 pounds) and receive a voucher worth $3,500 for a new work truck in the same or smaller weight class. There will be a finite number of these vouchers based on this vehicle class’s market share. There are no EPA mileage measures for these trucks; however, because newer models are cleaner than older models, the age requirement ensures that the trade will improve environmental quality. Consumers can also "trade down," receiving a $3,500 voucher for trading in an older work truck and purchasing a pick-up or van weighing between 6,000-8,500 lbs.
What is wrong with this?
Here are a few thoughts:
- It just meets the EPA equivalents of the CAFE standards for the vehicles and doesn't push beyond them for the initial payment. The CAFE standard for passenger vehicles: 27.5 miles per gallon, the EPA sticker equivalent is 80% of that, or where the Cash for Clunkers ($3500) begins at 22 mpg. The CAFE standard for light trucks: 23.1 mpg and the "compromise"'s benefit begins at 18 mpg (for light vehicles) (that 80% level) and 15 mpg for 6000 to 8500 lbs. The full ($4500) incentive is achieve by buying vehicles at somewhat higher than the EPA equivalent of the CAFE standard. Thus, the compromise barely encourages people to buy truly fuel efficient vehicles. In terms of confusion, have to assume that the 'trade-in' vehicle would be similarly constrained. (Thus, the 18 mpg limit is the the equivalency of roughly 22.5 mpg in CAFE/NHTSA standards. Since the EPA readjusted mileage standards, how will the average driver really know whether their car fits within the criteria?)
- There is an equity issue. Those who bought horribly fuel-inefficient vehicles, in the past, will now receive incentives for buying somewhat less fuel inefficient vehicles. Those who bought more reasonably in the past will have no such support. Why not, as part of this, offer a 'cash for clunkers' for vehicles above a certain age (let's say Germany's nine years) where the new car is at least some X% more fuel efficient than the old vehicle's performance? (How about $3500 for at least 30% fuel efficiency improvement and $4500 for at least 50% fuel efficiency improvements? Give someone with a 25 mpg vehicle a real incentive to get a 40 mpg vehicle ... a Ford Fusion Hybrid or a Prius or ... for example.) (Note, the Japanese do this is a somewhat different way. The registration fees are, partially, based on age of vehicles and go up as the cars get older. Average age of Japanese cars are somewhat less than half that US cars.]
- In pure carbon terms, this looks to be a highly ineffective way to reduce emissions (and, well, to reduce oil dependencies). From an economist who crunched the numbers (private email to me):
Trading an 18 mpg car for a 22 mpg car, with average milage of about 12,000 implies roughly 120 gallons saved per year. At 19 pounds co2 per gallon, that's roughly 1 ton per year at a cost of $3500. If a car lasts 10 years, not too much of a stretch, it's 350 a ton. If you count the interest on the $3500, at 3% real (a little high, these days, I know), you get closer to $450 a ton.
How did we get here?
If you double the improvement, trading in a 14 mpg this is obscenely expensive at $225.
If you make the 10 mpg jump, with interest, it's $235 a ton.
Note that, if there is a Cap & Trade, initial discussion of carbon prices are in the range of $15 per ton four years from now.
- A one-year deal? Why not plan in a gradual phase out, now, rather than legislate something that people will fight to keep?
- There is an interesting other problem. In essence, the basic model is broken. "MPG" is far less valuable for an approach for a "FeeBate" or gas guzzler turn in then using a "GPM" or gallons per mile. (Difference between 10 and 20 MPG and 20 MPG and 30 MPG same in MPG but not in GPM. 1st is move from .1 to .05 GPM while second is move from .05 to .033 GPM.) GPM is a much faster tool for understanding actual fuel use (and, therefore, CO2 emissions) impacts of differing automotive performace. GPM is a MUCH better measure if we are worrying about incentivizing, somehow, lower fuel use.
Thus, targets are laughably (crying?) too low; there are real equity issues to question; and the basic measures used are open for questioning.
The above are just some examples.
Sadly, not taken was another approach that was on the table (from Senator Schumer and Representative Israel) that would have targeted more serious improvements, requiring the new vehicle to have at least 25 percent better gas mileage than the CAFE standard for that class of car. Thus, rather than $3500 for a 22 mpg car, the Schumer/Israel approach would have been benefits for a 35 passenger car.
"This deal also demonstrates how Representatives from both coasts and the Rust Belt can reach agreement on difficult issues, and I expect more of the same as we continue to negotiate comprehensive energy and climate legislation."
Let us hope that negotiations on comprehensive energy and climate legislation don't result in such watered-down and inadequate compromises. We can, perhaps, live with an inadequate Cash for Clunkers deal. We can't, almost certainly, look forward to a prosperous future with inadequate energy and climate legislation.
PS: Additional information. Don't worry about trying to con a way around this to be able to buy a clunker to then trade in. The trade-in has to be owned for the previous year and be in working condition.