Cash-for-Clunkers: Too Much Cash for Cutting Emissions

The "cash for clunkers" program is wildly popular among consumers and car dealers. Apparently, it is also a wildly expensive way to cut greenhouse gas emissions.

The billion-dollar program could cost taxpayers $237 for each ton of greenhouse gas emissions, said Christopher Knittel, an economics professor at UC Davis, in a research paper (he called it "back of the envelope calculations").

That's only under the best-case scenario and roughly 8.5 times higher than the $28-per-ton estimate in the climate change legislation (Waxman-Markey bill) that the House passed in June. The cost could exceed actually $500 per ton, Knittel said.

"While the program is an expensive way to reduce greenhouse gases, it is certainly possible that the stimulus benefits outweigh the added environmental costs," Knittel wrote. "I leave this question for a broader analysis of the program, but note that key legislators have suggested that the environmental gains from the program are large."

The federal government launched the "cash for clunkers" program late last month to boost consumer spending on fuel-efficient cars. Car buyers get up to $4,500 toward buying a new car only if they get rid of their gas guzzlers, most of which have turned out to be American brand SUVs and trucks such as Ford Explorer.

The $1 billion program was so popular that it was running out of money on a few weeks after its launch (see Cash for Clunkers: The Program's Inside History). Last week, Congress approved another $2 billion for the program.

The U.S. Department of Transportation, which administers the program, didn't appear to have considered the environmental cost. It only touted that the initial program would take about 250,000 inefficient cars off the road.

Knittel did some calculations to find out just what all of that money would buy in terms of the emissions reduced from replacing polluting vehicles with cleaner ones.

Each gallon of gasoline produces about 20 pounds of carbon dioxide. Knittel took that number and factored in the government rebate, the fuel economy of the new cars, and the effects of having the clunkers on the road if the program didn't exist.

He also assumed that driving habits wouldn't change after consumers received new cars, though he noted that some analysts believe consumers would in fact drive more given the fuel economy they would gain.

He came up with different savings based on the number of years and the amount of emissions the clunkers would've produced it they weren't taken off the road by the government program.

If the clunker were left on the road longer and therefore produced more pollution, then the cost-per-ton would drop. Knittel's calculations showed that it would cost $333 per ton if the old cars were left on the road for five more years and $556 per ton for three years.

He came up with the $237 per ton estimate, the lowest in his modeling, by factoring in other social and health benefits of getting rid of clunkers.

These benefits would come from reducing the particulate matter, nitrogen oxide and other non-greenhouse gas emissions from the cars. Those emissions are known to cause health and environmental damage as well, and federal and state laws already are in place to regulate those emissions.

Image via kodiax2 / Creative Commons