Cash for Clunkers Pays Ten Times Market Rate for Greenhouse Gas Reduction

Robert Farago
by Robert Farago

The Cash for Clunkers (a.k.a. C.A.R.S.) program is a car industry bailout dressed-up as a green initiative. The University of California has put some numbers to the boondoggle. According to a study by UC Davis transportation economist Christopher Knittel, Uncle Sam’s taxpayer reach-around is paying 10 times the “sticker price” to reduce emissions of the greenhouse gas carbon dioxide. At least. “While carbon credits are projected to sell in the U.S. for about $28 per ton (today’s price in Europe was $20), even the best-case calculation of the cost of the clunkers rebate is $237 per ton. When burned, a gallon of gasoline creates roughly 20 pounds of carbon dioxide. I combined that known value with an average rebate of $4,200 and a range of assumptions about the fuel economy of the new vehicles purchased and how long the clunkers would have been on the road if not for the program,” Knittel said. “I even assumed drivers didn’t change their habits, although some analysts have suggested that the owners of new vehicles will drive more than they would have with their old cars.”

In the end, the lowest cost to remove one ton of carbon from the environment was $237. More likely scenarios produced a cost of more than $500 per ton, even when we accounted for reductions in pollutants other than greenhouse gases. That suggests the Cash for Clunkers program is an expensive way to reduce carbon.

If that were the point.

[Thanks to David Holzman for the link.]

Robert Farago
Robert Farago

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  • Kipling Kipling on Aug 15, 2009

    Remember that CrownVic, he of the perennial "I hate Ford" comments, cannot be persuaded that Ford is doing something decent. Bush also had the option to not bail out GM and Chrysler, but punted on making the final decision. And at that point Obama was a huge favorite to win the presidency, so he knew who was going to get to decide. At least the current administration is trying to do proactive things instead of scrambling to react to events.

  • John Horner John Horner on Aug 15, 2009

    The main point of the C4C program is to jump start the new auto business. So far it has actually been accomplishing its main goal. The environmental upside is a bonus. Nobody advocating for the C4C program ever claimed that financially it was the most efficient way cost:benefit wise to reduce CO2 emissions or pollution. Put another way, if we have a decent economy and a "normal" automotive new vehicle market, the C4C program would never have happened. "Liberal politicians (on both sides of the isle) can’t wait to completely destroy the US economy." Personally I don't believe that there are very many liberals or conservatives who want to destroy the US economy. Well, excepting those who wish to hurry us towards Armageddon, but I think they are still a small minority. It is quite possible to disagree strongly with someone on economic policy without going overboard into accusing them of wishing for the destruction of the other side. BTW, has anyone really proven the veracity of the "carbon credits" being sold in various markets? Many of the schemes behind those things are highly questionable.

  • Mpresley Mpresley on Aug 16, 2009
    John Horner : The main point of the C4C program is to jump start the new auto business. So far it has actually been accomplishing its main goal. Leave it to a car guy to come up with an associated metaphor. The truth is, that an economy, much less an industry, does not need to be "jump started." The business cycle is, in many respects, due to government mis-allocation of investment away from the private sector. All that does is allocate market led investment (re: individual citizen choice) into areas which the individual did not see fit to invest. It is a gross distortion, with usually unintended consequences (such as those actually able to afford a new car holding off making the purchase because they cannot compete with government subsidies). This is just bad economics, especially since it is financed by either borrowed or created dollars.
  • Anonymous Anonymous on Jul 06, 2011

    [...] like the Cash For Clunkers program. Apparently LaHood has completely forgotten how riddled with waste, inefficiency, fraud, confusion, delays, unintended consequences and all-purpose madness that [...]