By on January 16, 2009

“Cash for Clunker” policies have been enacted in a number of developed countries as a conveniently “green” way to stimulate new car sales. The idea is sold as a greenhouse gas-reducing measure which provides tax credits for removing older, less-efficient models from the road. Of course the point isn’t to get people out of cars or permanently reduce the number of GHG-emitting vehicles: to claim credits, you typically have to buy a new car. Texas already has its own take on the debt for more debt swap. And now the Congress– well the auto industry anyway– wants a piece of the action. Hence the Accelerated Retirement of Inefficient Vehicles Retirement Act of 2009.

According to Green Car Congress, in order to claim the full $4,500 tax credit, participants would have to scrap a vehicle that was rated at 18mpg (CAFE ratings, somewhat lower than EPA) or under and built in or after 2002. They must also replace it with a new vehicle.

You can get $3k towards a used car or mass transit expenses for vehicles of that age, but the point is clearly to stimulate sales of new vehicles. Older vehicles get smaller credits, ranging from $3k for a new vehicle replacement for a ride built between 1999-2001 ($2k for a used or mass transit purchase) to $2k for replacing a 1998 or older model with a new car ($1,500 for usedor mass transit).

The American Council for an Energy-Efficient Economy (ACEEE) estimates that this plan would attract half a million to a million takers, and would save 40k to 80k barrels per day of motor fuel by the end of the fourth year, while reducing C02 and N0x emissions.

Unless of course you subscribe to the crazy notion that the greenest car is the one that has already been built, and factor in the embedded carbon and energy of new cars. But then again, the greenwashed facade was only intended as thin cover for an auto-dealer bailout anyway.

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34 Comments on “Congress Calls for Clunker-Culling...”


  • avatar

    Building the car in the first place accounts for around 10% of lifetime emissions. You can do the math on trading one individual car for another, but clearly gains in reducing carbon emissions can be made if the bill is done right.

    Don’t you mean the car must be built in or BEFORE 2002?

    My worry is that such a bill will result in scrapping a lot of classic cars that run around places like southern California. In fact, I brought that up with someone from ACEEE, who was receptive.

    This is the sort of micromanagement which, while not bad, is an inefficient way of reducing carbon emissions compared to having a carbon tax.

  • avatar
    LastResort

    I will certainly consider buying a new truck to replace my aged 92 truck if I can get a 2K credit for the value of it.

  • avatar
    radimus

    If this passes something tells me a lot of nice older vehicles that get “scrapped” under this provision are going to end up back on the market with R titles.

  • avatar
    John Horner

    Weird, I would think that the credit should be increased the older the car is. Why would we want to encourage getting rid of cars less than seven years old? Generally speaking, the older the car, the higher its emissions.

    Another strange effect is that the market value of pre-1998 low fuel economy vehicles would suddenly have a floor of $2k.

  • avatar
    TEW

    If only I could find a bunch of salvaged late model SUV’s so I could turn them in to Uncle Sam. I bet there are a lot of people like me who are now thinking that. The worst part about this bill is that it will raise used car prices so more Americans won’t be able to buy transportation.

  • avatar
    Edward Niedermeyer

    John Horner: Exactly. This is an attempt to bring back the old consumption habits that kept our economy going for so long. Green has nothing to do with it.

    As for the floor price, it will be interesting to see if it has an effect. Tax credits aren’t exactly the same as cash from the government, so it might not be a very effective floor. Still, as someone who generally prefers older things to newer ones, I’m curious to see what the effect of this policy will be.

  • avatar
    gamper

    This bill looks ripe for abuse.

  • avatar
    RedStapler

    Let the boondoggle begin. This policy feels vaguely Japanese with its incentive to cull old running cars to goose sales.

    At best all this will do is pull tomorrows sales forward to today. I doubt many people who were not already on the fence or in buy mode are going to be incentivized to make a purchase.

    Tax credits like these just beg for gaming the system. Think windmills made of wood or free exotic vacations with purchase of a solar water heater. I predict that states without inspection standards to title a car will have a lot of totaled cars and puttering clunker come back from the grave to qualify for this credit.

  • avatar
    CarnotCycle

    So if I have two beaters to trade in for the Prius of my Nancy Pelosi’s dreams does that mean I get $9k of Sugar back? I smell a cool scam possibility here…

    1. First, you’ve got to find a corrupt used-car auto-dealer (this should be easy part).

    2. Then, leverage away every dime of capital and credit you’ve got to acquire a couple of hundred beaters (D3 70′s iron, Ford LTD’s and Vegas as far as the eye can see).

    3. Take said beaters down to Corrupt Joe’s Slightly Used Rides and trade’em all in for every car that qualifies as a “clean” ride on his lot.

    4. Break even on the purchases of all those qualifying cars with Sugar-rebates. Then, sell the qualifiers at a fire-sale, pocket the cash.

    5. Sell all the Vegas and LTD’s for scrap, pocket that cash too. Split the loot with Joe.

    6. Flee to Brazil before a bureaucrat notices how odd your 1040 looks, and retire.

    Michael Milken was born and died just a couple decades too soon it seems like.

  • avatar
    gslippy

    For me, the greenest car is the one that is PAID FOR.

    This bill will only further raise people’s debt load, and have the effect of raising car prices. It will have no impact on the environment.

  • avatar
    geeber

    John Horner: Another strange effect is that the market value of pre-1998 low fuel economy vehicles would suddenly have a floor of $2k.

    And the price of new vehicles will go up by $2,000.

  • avatar
    findude

    Actually, this might be my opportunity to get rid of that old driveway eyesore that barely runs and is worth less than $2,000.

    Does the bill apply only to cars manufactured since CAFE came into existence? What about older junkers?

  • avatar
    rpn453

    Building the car in the first place accounts for around 10% of lifetime emissions. You can do the math on trading one individual car for another, but clearly gains in reducing carbon emissions can be made if the bill is done right.

    Where does the 10% number come from? I think it’s a little low, and that they probably ignored a lot of energy inputs to get that number. People tend to ignore most of the energy and resources that go into developing and manufacturing a product.

  • avatar
    George B

    If the real goal is to increase car sales, do something about the crazy per-vehicle fixed cost of insurance. I’d own more cars if I didn’t have to pay so much for insurance on each one, even though I can only drive one car at a time. The high cost of insurance skews the car market toward larger swiss army knife vehicles that can tow a boat on the weekend, etc. along with provide transportation to work. I’d gladly buy a spare depreciated out older car, taking it off the market, if I didn’t have to pay so much for insurance for car redundancy.

  • avatar
    Robstar

    I think the 10% number depends on too many variables to calculate in a public internet forum. How big is the vehicle? What does it NORMALLY give off in emissions? What is the lifetime ? etc etc etc.

  • avatar
    Samuel L. Bronkowitz

    Government can fix anything and most of their programs are efficient, effective, and well administrated…

  • avatar
    200k-min

    What about a 1998 or older model that gets better than 18mpg? What about the guy that wants to upgrade his 1989 Civic for a “more fuel efficient” model….oh wait, the new one gets worse MPG’s you say?

  • avatar
    golf4me

    The greenest car you can buy (besides a nuclear powered, invisible, warp-drive whatever) is a USED car. Granted it should be “newer” say less than 7 years old. Just think of all the stuff that has to be made, from the raw materials, the energy it takes in the factories, transport, etc, to make a new car from ground to showroom. Hybrids are even worse in this regard. Then consider that older cars are hardly recyclable aside from thier metal, and this is hardly going to be good for the earth overall…

  • avatar
    threeer

    Sounds like a great way to artificially prop up our flagging automotive manufacturers while piling on more debt to those least in position to handle it. BRILLIANT! I’ll keep my 1997 Tercel running for a few more years, thank you. It’s paid for (what a foreign concept in this country), gets above-average MPG…and, oh yeah…it’s paid for!

    The biggest and best incentive to get people to buy new cars (here’s lookin’ at you GM and Chrysler…)? BUILD CARS THAT PEOPLE ACTUALLY WANT TO OWN!

  • avatar
    PeteMoran

    @ golf4me

    From your own the Dept of Energy;

    About 11% of the energy used in a car’s lifecycle is used for it’s manufacture. The remaining 89% is used over it’s lifetime INCLUDING about 30% of that in the provision of the fuel (ie recovery, refining, transport), not the fuel itself.

    Buying a used car is NOT the most efficient, nor the most environmentally friendly choice, especially with cars lasting longer. You only need a small increase in efficiency to have an ROI.

  • avatar
    brentalan

    “So if I have two beaters to trade in for the Prius of my Nancy Pelosi’s dreams does that mean I get $9k of Sugar back? ”

    I believe it is only 1 vehicle per person.

    I had also heard you have to have owned the car for some time for it to be eligable. And further, that you cannot own several cars to be able to participate.

  • avatar
    eggsalad

    Hm, so my 25-year-old station wagon that gets 35 mpg around town should be scrapped in favor of a (what?) that gets 25mpg around town??

  • avatar
    golf4me

    Thanks Pete, you made my point. By REPLACING cars that already exist with MORE CARS, you’re just adding more unecessary energy usage, and that’s not even taking into account the use of new raw materials, and the related pollution, etc. , which is what I wrote about anyway. Plus a lot of 1998 cars are as or more efficient than their 2008 replacements. Maybe not as clean, though, but hardly clean enough to make up for their manufacture, and additional landfill, etc etc.

    Good & interesting stats to know though!!

  • avatar
    ihatetrees

    200k-min:
    What about the guy that wants to upgrade his 1989 Civic for a “more fuel efficient” model….oh wait, the new one gets worse MPG’s you say?

    “The guy” who owns a well maintained “1989 Civic” isn’t a person to the current congress.
    “Real people” are those earning 30K who drive ’06 Avalanches financed for 72 months… They’re suffering and need need a Cobalt.

  • avatar
    Phil Ressler

    Reduced carbon emissions is the least reason for this kind of program, hence of course the economics are completely wrong. We know in California that well over half of the remaining automotive-sourced *noxious* emissions come from less than 10% of the cars on the road. Reducing these emissions, which have an actual, present-day consequence to regional public health, should be the priority so we ought to first be encouraging the removal of the oldest, truest clunkers. Cars built since 2001 aren’t a problem. They’re quite clean by comparison.

    Environmentally, we should be giving over-market credits to decrepit clunkers to get those owners into newer, cleaner used cars but of course that route to cleaner air is *politically* unacceptable because, well, someone poor would get an upgrade “free,” irrespective of the greater good to the public at large.

    So since this proposed program is impertinent to any real environmental benefit, let’s admit it’s just a new car demand generation program under guise of carbon hysteria. There was a time when a seven year old car was likely a clunker, but vehicle quality has changed dramatically. Model year 2002 and newer cars are not yet clunkers in large numbers, in a manner that’s disproportionately damaging environmentally. Moreover, with a little appropriate lubrication in the credit markets and a bump in economic confidence, owners of these cars are likely able to afford replacement without further assistance.

    Phil

  • avatar
    PeteMoran

    @ golf4me

    By your logic the average fleet economy will never improve which is not only untrue, but can’t be sustained.

    Even if the new car only lasts as long as the car it replaces, it only has to be about 11% more efficient to recover the energy costs, and it is immediately using less imported fuel, which might be a completely DIFFERENT $$$ value.

  • avatar
    DIYer

    My daily driving vehicles are two 1993 Pontiacs and a 1995 Chevy truck, each of which were purchased new, have been maintained over the years, and still have a lot of useful life in them. Each gets 20-22 mpg. When I dispose of these vehicles, I plan on donating them to Purple Heart for a charitable tax donation, as I have done with previous vehicles.

    This bill reminds me of an failed effort by the US auto manufacturers, particularly GM, to restrict the manufacture and sale of automotive parts for vehicles 10 years or newer to OEM’s and their dealerships only. This would have doubled the price of parts that one normally purchases at an independent auto parts store.

    CarnotCycle : You will be pleased to know that Michael Milken is still alive and well and living in his hometown of Encino, CA. He is currently lobbying for a last-minute pardon from President Bush for past securities violations. We’ll know by Tuesday is Mr. Milken is successful in that effort.

  • avatar
    Morea

    PeteMoran :

    From your own the Dept of Energy;

    About 11% of the energy used in a car’s lifecycle is used for it’s manufacture

    I’d like to learn more, does anyone have a reference for this report? (It would save me the trouble of trying to find it on the massive DOE web site!)

  • avatar
    Jimal

    John Horner: My thought exactly, though I guess they need to provide a bigger credit to entice someone to turn in a newer vehicle. While I agree about losing classic or muscle cars, I wouldn’t mind a $1,500 credit to replace my ’85 Volvo winter beater with the used Caddy CTS I was going to replace it with anyway.

  • avatar
    Morea

    OK, the report is here:

    http://www.transportation.anl.gov/pdfs/TA/378.pdf

    and makes interesting reading.

    The 11% figure is based on the assumption that the car will last 160,000 miles, and will get 24.8 mpg over its lifetime.

    The results are based on the DOE GREET model which anyone can download and use. Input assumptions can be changed as the user sees fit. Application of this model is the basis of the Hummer-is-more-green-than-the-Prius arguments. Of course, it all depends on input assumptions to the model!

    Model download here:

    http://www.transportation.anl.gov/modeling_simulation/GREET/index.html

  • avatar
    davey49

    My friend drives a 1986 Plymouth Voyager
    EPA MPG rating is 18 MPG combined
    what is the CAFE MPG?
    He should get a voucher regardless, as its definitely an old clunker he needs to get rid of, and also unsafe. No headrests or airbags.
    I’m trying to convince him to get a newish car but he’s afraid to take a loan out. He makes enough money but never saves up enough to get a decent car.
    The 18 MPG rating seems ridiculous. I think no cars get under 18 MPG and no one would give up a running truck.
    The “Clunker Bill” really should also include
    cars without side airbags
    cars that received less than 4 stars in NHTSA frontal crash tests
    cars with more than Tier 2 Bin 5 emissions
    cars without ABS
    I also prefer the previous proposal that the new car get 5 MPG better than the old one instead of the hard and fast 18 or less rating

  • avatar
    Gunit

    I read an article stating that more than 50% of the pollution generated by a vehicle over it’s lifetime is created during it’s production. Which makes more sense to me than the 11% stated here when you factor in all the mining, drilling for materials, shipping etc. I’ll see if I can find the link. I suspect the largest influence on the variation in the outcome of these studies is created by those who pay for them…

  • avatar
    Jimal

    davey49,
    Are we really to the point where a car without ABS or side airbags is a clunker? I get the emissions requirements to a point; I would try to cull cars that can’t pass emissions tests appropriate for their age. That and plain old attrition will clear out the older, dirtier cars.

    The rest is silly.

  • avatar
    davey49

    Attrition isn’t good enough, people keep their crappy running cars too long.
    With the safety regs I figured I’d save the people in the car as well as the people outside


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