THEGREENGROK

Cash for Clunkers Bill Could Be a Clunker


by Bill Chameides | April 6th, 2009
posted by Erica Rowell (Editor)

Permalink | 35 comments

Read this before turning your car in to help the environment — the “upgrade” might not actually help.

Rahm Emanuel said: “You never want to waste a serious crisis.” In other words, use the momentum of addressing one crisis to advance other important policy objectives. That’s what the “cash for clunkers” bills rattling their way through Congress will do, right? Maybe not.

Representative Betty Sutton (D-OH) and Senator Dianne Feinstein (D-CA) have both proposed so-called “cash for clunkers” bills. The idea behind them is buy a brand new car, scrap the old gas-guzzler, and the government hands over a nice check to offset the purchase cost.

Sounds like a great deal all around.

  • You get a new car at a reduced price — good for you;
  • The automobile industry gets to sell a car — good for the economy; and
  • A gas-guzzler is replaced by a fuel-efficient car — good for the climate.

The Center for American Progress hails these bills for “help[ing] beleaguered automakers, lower[ing] our dependence on foreign oil, and clean[ing] up the air we breathe.”

Sorry to be a party pooper, but I’m not convinced about that lowering foreign oil dependence and cleaning up air stuff.

The Sutton Bill

The bill put forward by Rep. Sutton (H. R. 1550) has major problems. Reportedly, it would provide $3,000-$5,000 vouchers to consumers who purchase a new car with at least 27 miles per gallon (mpg) on the highway (for trucks it’s 24 mpg) and scrap a car that is at least eight years old.

First of all, the 27 mpg requirement is a joke. The corporate average fuel economy (CAFE) for all cars sold in 2009 is 27.5 mpg — for both highway and city. So a 27 mpg limit is below half of all the U.S. cars that will be sold this year. If the bill is to encourage fuel economy, why set the limit below the average — wouldn’t above the average make sense?

And what about the requirement that the clunker must be at least eight years old to scrap it? The problem with that is there’s no guarantee that the old vehicle is really inefficient in terms of fuel. The CAFE standard for cars sold in 2000 was the same as the CAFE standard for 2009 cars. Given the bill’s paltry 27 mpg requirement for the new car, there is a more than 50 percent chance the scrapped car has better fuel economy than the new one.

Clearly the Sutton bill needs some work before it hits prime time.

The Feinstein Bill

In contrast, the Feinstein bill (S. 247) appears to have some teeth in it. It provides cash incentives (between $1,500-$4,500) for buying a car that exceeds the government’s fuel-efficiency standards by at least 25 percent (or about 34 mpg given the current CAFE standard) and scrapping a car that gets no more than 18 mpg. (For more details, see this white paper [pdf] prepared by the American Council for an Energy-Efficient Economy.)

This is good. It will almost certainly put more fuel-efficient cars on the road. But the greenhouse gas benefits are less clear. How long it takes to get a carbon benefit depends on the fuel economy differential between the two cars.

When Does a New Fuel-Efficient Car Lower Greenhouse Gas Emissions?

Years needed to pay back the CO2 emissions from scrapping an 18 mpg clunker and buying a new car as a function of the new car’s mpg rating. The arrows show the minimum mpg’s required for both a new car and a new light truck under the Feinstein bill. Assumptions: embedded CO2 in the manufacture of a new car is 6.7 tons. Car is driven 13,000 miles per year.

Scrapping an old car for a new one doesn’t guarantee a lower carbon footprint even if the new car gets better fuel economy. The reason: manufacturing and delivering the new car consumes energy, and producing that energy involves greenhouse gas emissions. The amount of carbon dioxide (CO2) emitted to produce a new car has been estimated to range from about 3.5 to 12.5 tons, or an average of about 6.7 tons.

So buying a new car means an extra 6.7 tons of CO2 emissions — you wouldn’t have emitted all that pollution had you just kept your old car. Assuming your new car is more fuel efficient than your old car, you offset or work off that 6.7 tons down by driving your new car. But that doesn’t happen immediately. You have to drive and keep on driving until the amount of CO2 you save from driving the new car instead of the old car equals the 6.7 tons needed to manufacture your new car.

The time it takes to completely offset the 6.7 tons is the CO2 payback time. Clearly the more fuel efficient your car is relative to the old one, the shorter is the payback time.  How much shorter? Here’s an example.

Suppose your old vehicle gets 18 mpg (the maximum allowed in Feinstein’s cash-for-clunker bill). The graph above shows the CO2 payback time as a function of your new car’s mpg.

Feinstein’s bill stipulates that the new car must be at least 25 percent more fuel-efficient than the government’s current standard, which is 27.5 mpg. So that means your new car must get at least 34.375 mpg. As you can see from the graph, the payback time will be less than three years for cars — which is a good deal for the climate.

(The fuel economy standard for light trucks is 23.1 mpg, which would mean your new car would have to get a minimum of 28.875 mpg to qualify under Feinstein’s program. And so the payback time for these cars will be a bit longer.)

Feinstein’s bill also includes a cash incentive for those who scrap their old car in favor of public transit. (See details in Sen. Feinstein’s press release.) Taking the old gas-guzzler off the road and not replacing it with a car at all of course would pack the biggest, most immediate climate benefit.

Bottom line: Not all cash-for-clunkers are created equal. To make it work, you have to insist on a significant miles-per-gallon differential. Anything less is a waste of a serious crisis.

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35 Comments

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  1. Huttman
    Jan 9, 2010

    You make a thoughtful and reasoned argument on this subject with some solid opinions. Keep up the good work on this blog.

  2. Dan
    Dec 30, 2009

    I agree that due to manufacturing the new cars, this hurts the philosophy (in a short term) of cleaner air. However, without the manufacturing, the economy continues to spiral downward, which is one of the main focuses of the world (economy is bad worldwide); also, with production of cleaner, fuel efficient vehicles, you would be outputting less carbon by that vehicle. Let’s face it, people are going to buy cars; it’s more of a case,in most minds, of what’s more affordable, a used clunker that runs better than my current vehicle (an even older, less efficient clunker) or a new vehicle (that the gov’t is going to help me purchase) with better emissions (if there is such a thing). Unfortunately, most Americans are not REALLY on board with fighting pollution, the only way to get them to BUY into that concept,is to give them a monetary incentive. This is not a statistical fact, to my knowledge, it’s only my opinion;based however, on what I see people do and hear what they say.

  3. Jim
    Aug 6, 2009

    My concern with the cash for clunkers program is that it might encourage people to go into further debt that probably shouldn’t. Even though we might need to move away from a growth economy long term, right now creating more debt may not be a good thing.

  4. Randy
    Aug 5, 2009

    How come no mention of the right to privacy everyone gives away when the dealer logs on to CARS?The government now owns the computer and all that is on it or will be on it.Sounds like a good deal,right?

  5. Lis
    Jun 20, 2009

    I was all excited until I went and looked at the EPA numbers they are using to determine what your old car’s combined mpg rating is. The ONLY cars on it that qualify are Lamborghinis, Rolls Royces, Mercedes Benzs, etc. We badly needed to ditch our 1994 Camaro that averages about 16 mpg, but according to the EPA stats, it gets 20 mpg combined! So we don’t qualify. And worse, only the richest people do qualify, and how many of them are going to agree to having their $300,000+ Lamboghini destroyed to make $4500 they don’t need.

    • Jim
      Aug 6, 2009

      I think your comment might be misinformed. I know a couple of people who had old pick ups that qualified, they are decidedly not rich. Reading the news reports it sounds as if many not rich people are cashing in, they ran out of the first billion and are probably going to appropriate another 2 billion.

  6. Dave
    Jun 15, 2009

    I have a 1979 Chevy Nomad van that I bought new. It has a 350 V8 in it and gets about 10 mpg highway. Great for hauling materials for home projects and helping kids move. It is truely a clunker and a real oil burner, but does not even qualify for the program as they are stopping with model year 1984. A clunker is a clunker. What gives?

  7. Mark
    Jun 10, 2009

    It is very costly on the environment to throw away a vehicle to replace it with a new one. Maybe the combination should consider fuel mileage and an extended factory warrantee. The Postal service was smart enough to buy the new LLV Postal trucks. They are required to run 20 years without an overhaul.

  8. karenc
    Jun 6, 2009

    This bill would put every charity car donation program in the nation out of business since the amount of the voucher would be much greater than the tax deduction. The solution is to simply allow the charity to issue the voucher in lieu of the tax deduction. The charity would then junk the car in accordance with the bill. This way, everyone wins, the car dealer, car maker, car buyer and the charity.

    • Dan
      Jun 10, 2009

      I know that most of you can’t hear the words you are saying, but this is absolutely crazy economics. The Government wants to coerce people to destroy assets in the claim of saving the planet, or the environment, or to save you from evil foreign oil(most of which comes from Canada) and they will give you FREE money too!!! Wait I have an idea let’s give $4,500 vouchers for people to smash all the windows in America that are at least 10 years old and not 99%”energy efficient” just think of what that will do for the construction industry and the glass manufacturing companies! This is Classic KOOK-onomics!

      • Bill Chameides
        Jun 10, 2009

        Dan: It is a little crazy. But … the government is not “coercing” anyone in cash for clunkers; it is simply incentivizing. The issue of whether cash for clunkers makes economic sense is a question for economists — my post is whether the program makes sense in term of greenhouse gas emissions. On the economic issue: Apparently many economists have concluded that the way out of our economic mess is to get people to buy stuff like new cars. The logic kind of escapes me; I thought that one of the things that got us into this mess was the fact that everyone was spending money unnecessarily, borrowing and not saving. But, hey, I’m just a scientist.

  9. dave
    Jun 5, 2009

    This bill does not anywhere state the amount of economic impact it will have on a national level to consumers and to small businesses. By requiring these vehicles to be shredded rather then to be processed by licensed auto recyclers, the bill will eliminate the sale of reuseable engine, transmission, and other drive-line components. It will put many recylers out of business, as selling mechanical parts is over 50% of their revenue. Comsumers with bad credit or with no jobs will be unable to buy a new car, and unable to fix their current car due to the lack of engines and other driveline parts. That will have a HUGE impact on the auto repair and service industry. They also will have to close their shops–they cannot sustain their businesses on brakes and oil changes!! It will cause difficulties for used car sales, hurting even more car dealerships. And an added result will be that with a glut of metal from shredding these cars, the price of steel will be forced down even further, hurting the steel industry. This administration already has its fingers in the banking industry, and the automotive manufacturing industry, with unimpressive results. With this legislation they will take down the 14th largest industry in this nation.

    • RedOscar3
      Jun 20, 2009

      Personally, I don’t expect this program to be that successful. As a person with five vehicles in my household, only one qualifies for the program either due to age or combined fuel mileage value being outside of the limits. And to top it off, the one vehicle that qualifies (1990 Chevrolet Astro Van) is the one vehicle which I would not consider getting rid of. So I’m just planning to keep what I have and forget any thoughts of participation.

  10. Irvin Dawid
    May 18, 2009

    Dr. Chameides, I’m amazed that the air quality benefits of a ‘voluntary vehicle retirement’ program haven’t been discussed in this legislation. In fact, when the term (Cash for Clunkers) was originally devised, did it not refer to scrapping the oldest, most ‘polluting’ (in terms of ozone precursors and other criteria pollutants) vehicles from the road? Somehow, Cash or Clunkers has turned into a debate about Cash for Guzzlers – and whether it is effectively improving fuel economy of the nation’s auto fleet rather than improving air quality. In CA, we have been doing this for some time – in fact, it’s considered the most effective way to meet the State Implementation Plan requirements. [Federal clean air laws require areas with unhealthy levels of ozone, inhalable particulate matter, carbon monoxide, nitrogen dioxide, and sulfur dioxide to develop plans, known as State Implementation Plans (SIPs)] VAVR, as these programs are called (Voluntary Accelerated Vehicle Retirement) are employed by both the regional air districts and California via the Bureau of Auto Repair.

    • Gary Kirkland
      Jun 2, 2009

      The truly sad part about this is that Big Oil will remain in firm control,thanks to the EPA-OBD II Vehicle Emissions Inspection Law, which mandates that all Gasoline powered vehicles, from 1996 to the present,must operate at 14.7 parts of Air to 1 part of Fuel.It is entirely possible to safely convert Gasoline into a clear, dry Vapor that is 100 parts of Air to 1 part of Fuel.Even the largest SUV could easily get 50+MPG,& emit a fraction of the Emissions of a 14.7/1 Fuel System, with more Power, and longer Engine Life.For even more insight, do a search on Tom Ogle, then go to http://energy21.freeservers.com/bookrep.html and check out the last part of it.But, all OBD II Vehicles have Oxygen[O2]Sensors that detect the level of polluting Exhaust Emissions.When a Vehicle is connected to an OBD II Emissions Analyzer for Inspection, whatever those O2 Sensors read, is detected.Too much Pollution,& it will fail,as well it should.But, with vaporized 100/1 Fuel, O2 Sensors will detect nothing, and an O2 Sensor Failure Code will be generated.Thus, it is entirely possible to fail an Emissions Inspection for not emitting enough Pollution!This insane Law, that only benefits Big Oil, was passed during the Clinton Administration, with Al Gore’s enthusiastic support! Go figure! And President Obama can’t change it either, as long as Big Oil is in firm control!Plus, this so called “Clunker Bill” will effectively eliminate older Vehicles, that could legally utilize safely vaporized Gasoline !I have contacted many Politicians and Environmental Organizations, and not one of them has been able to answer my Question ; “Why is it illegal for any Gasoline powered Vehicle, 13 years old, or newer, to emit too little Polluting Exhaust Emissions ?” So, can you answer the Question , or do you honestly believe that the Clunker Bill is the answer ?

  11. Bill
    May 10, 2009

    So those who are driving a 15 year old civic which gets 25 MPG gets no money at all because its above the magic 18 MPG number? Yet somebody that goes from a 10mpg SUV to a 12MPG SUV gets 4500? Can we please make it more unfair for the pay-check-to-paycheck people of this country?

    • Bill B.
      Jun 1, 2009

      So, because I bought a relatively fuel-efficient Corolla 10 years ago, I won’t qualify for a rebate. In effect, I’ll be penalized. Double-penalized, actually — I’m being taxed to give a price break to some SUV-driving gas hog. And the gas-hog gets a juicy, multi-thousand dollar reward. Sounds like a great bill to me. Bleah.

      • Murali Y.
        Aug 2, 2009

        Why 18M, why not not 19 or 20 or 21. To the point of earlier commenters, most american cars from mid nineties are of terrible quality. If govt. wants to encourage people to buy new cars, why not provide a gradual table instead of All or nothing solution? Atleast this way everyone interested in buying a new car is incentivized instead of only those who drive monster SUVs

    • Jef
      Jun 2, 2009

      This bill is not about reducing emmisions or reducing our fuel consumption. It is a bill to increase auto sales and therefore help out the auto industry. This is yet another government program that subsidizes automobile transportation. If we are to ever change our energy-intensive transportation industry, the subsidies must end.

  12. Karen Ravis
    May 8, 2009

    Forget the fact that most people are low income that drive these “clunkers” How are they supposed to make the payments on a new car? Also most of us do not have good credit ratings, which would mean a higher interest rate, who would give us a loan, and we are in the shape we are in because we have either lost our jobs or now have a lower paying job. Can someone just give us a “NEWER used car with that money? Our personally is a 1992 Buick with 277,000 miles and it still runs.

    • Charee
      Jun 4, 2009

      I’m glad somebody brought this up. I drive a 1993 Chevy Astro with 300,000 miles, and it’s on its last legs. I would have retired it years ago if I could afford to, but I barely make ends meet even without car payments. Even if I could afford payments, I don’t have the credit to qualify for a loan in the first place. I was excited when I first read about this program, thinking they had finally come up with a stimulus that will help me… but if it has to be a NEW car to qualify for the voucher, I am going to have to keep my clunker, drive it till it dies, then scrape together a few hundred $$ to buy another clunker. Incidentally, there should not be a carbon cost in a used car, because the original owner already paid it, right?

      • Sodog
        Jun 20, 2009

        I agree. this will be devistating on lower income people who cannot affort a new car. With this bill most used cars become worth $4500. So my old eldorado which still runs great and is worth about $3000 suddenly becomes worth $4500 to me. And so does every older car. Many people have bought extremly cheap transportation in the past. That will no longer be an option. By the way, now im waiting for the bill to pass so I can buy a Prius, which I was going to do anyway.

  13. Brandon Jewett-Hall
    Apr 27, 2009

    I’m not sure if it’s included in the cost-of-production figures or not, but getting rid of the old car also will have some non-zero carbon impact (shipping it to car recycling center, processing it for scrap, potential incineration of non-recyclable materials, etc.). I would guess it would be much lower than the impact of production.

    • Bill Chameides
      Apr 28, 2009

      Brandon – good question. While the embedded carbon numbers for a new car are based on life-cycle analyses — which track carbon emissions from “cradle to grave” and thus should include disposal or scrapping — that is not always the case. As you point out, the carbon emissions associated with disposal tend to be so much lower than the carbon embedded in resource extraction and car production, that some analyses don’t include a value here.

  14. Jack Hayes
    Apr 16, 2009

    I knew this piece would be another left-biased product of my alma mater when I read the first sentence. Politicians (of both stripes) don’t use crises to advance “important policy objectives,” they use them to advance their own power. Pressing on, I read that the concept “sounds like a great deal all around.” Conspicuously absent from whomever comprises “all around” are those of us who are footing the bill for yet another giveaway. I’ll give Dr. Chameides credit for a cogent anaysis of the two bills, which, unfortunately, he spoiled with a foray into the “evils” of carbon dioxide. One can only hope that the growing distaste among the American people for out of control government spending will keep either of these bills from seeing the light of day.

  15. mike williams
    Apr 14, 2009

    There is more to look at then just MPG and Greenhouse Emissions. 1. If the bill gets to much teeth to it no one will be able to get the check because they do not meet the requirement. 2. And as cars get old the fuel-efficiency and etc. goes down. 3. And this is to also get the automobile industry going. One other example. The old car could be out of alignment so the tires will have to be replaced faster and every thing that goes with the making that tire. Etc. etc. etc.

    • Bill Chameides
      Apr 16, 2009

      Mike, Thanks for the comment. 1. Agree, no one should get a check if they don’t meet the requirement. 2. Maybe so, but new cars don’t necessarily meet the mpg claimed on the sticker and if not properly maintained, their mpg can also decline with time. 3. Agree, but post was about whether the new bills would help reduce carbon emissions. One other example: see #2 above.

    • Adam Kuehn
      Apr 30, 2009

      1. If the bill doesn’t have enough teeth, it is useless. The point is to encourage the right kind of behavior, which you can only do by rewarding the behavior you are looking for. There are at least eight available car models on the market today that get 34+ mpg. That ought to be enough. CAFE standards are scheduled to be raised to 35 mpg by 2020, anyway, so the number of available models will increase substantially. 2. As pointed out, deterioration over time applies to both old and new vehicles. 3. Yes, but also to get them going in the right direction. I don’t see any problem with encouraging auto makers to build higher-efficiecy models in preference. Would the auto industry prefer increased demand for high-efficiency vehicles, or status quo?

  16. Rick Larrick
    Apr 10, 2009

    Very useful information and analysis on the CO2 payback. I had seen lower figures for CO2 emissions in manufacturing cars (closer to 3 tons), so 7 tons is a bigger hurdle. The Sutton bill is definitely weaker than the Feinstein bill in terms of forcing efficiency gains. The Feinstein bill was far more favorable to CO2 reductions. (However, I *thought* that the Sutton bill at a minimum forced the new car to have a higher MPG than the junk car (and be higher than the 27 or 24 minimum).) Also, the Feinstein bill looks much more favorable in terms of “carbon payback” if you focus on a typical or intermediate MPG value, and not the 18 MPG max. As we argued in the MPG Illusion paper last June in Science, MPG levels in the teens are deceptive when judging gas savings from MPG improvements. All the MPG levels in the teens look the same: Bad. But MPG improvements in that range are in the steep part of the reciprocal function between GPM (“gallons per 10,000 miles”) and MPG: http://www.mpgillusion.com/2008/12/graph-of-gallons-per-10000-miles-gpm-as_02.html To see the benefits of cash for clunkers, and the time needed for CO2 payback, it’s worth looking at a range of mid-teen MPGs as the starting point. For example, replacing a 14 MPG car with a 25 MPG car eliminates 3 tons of carbon dioxide over 10,000 miles. That pays for the marginal CO2 emissions of manufacture in about two years. The pdf table at this post has a breakdown of less efficient and more efficient cars to see the gas savings per 10,000 miles. With the rule of thumb that 100 gallons of gas is equal to one ton of CO2 emission, you can see where the big savings are: http://www.mpgillusion.com/2009/04/cash-for-clunkers-table-for-car-buyers.html The ideal Cash for Clunkers program would in fact give credits that have a linear relationship to GPM improvements since GPM (not MPG) has the linear relationship to CO2 emissions. I would argue that GPM as a standard would help people see the wisdom of a well-constructed Cash for Clunkers by focusing attention on the incremental improvements in gas consumption (not mileage).

    • Bill Chameides
      Apr 15, 2009

      Rick: Sure. 1. The lower the mpg of the car one scraps the better the emissions savings from a bill like that of Feinstein. I chose 18 mpg to illustrate what happens, and even with 18 mpg the payback is pretty quick. 2. And GPM is clearly a better metric that mpg. And by the way I did a post on your GPM-metric earlier. Check it out here http://www.nicholas.duke.edu/thegreengrok/mpgstats

      • docroc
        Jun 2, 2009

        Couldn’t one make the argument that, since, in many cases, the auto industry is trying to sell excess existing inventory, that the carbon footprint of its manufacturing should be viewed as a sunk cost and not factored into the benefits analysis of buying the new, more fuel-efficient car?

        • Bill Chameides
          Jun 8, 2009

          docroc: not sure I follow your logic. If you don’t buy the car on the lot, then the new car won’t get manufactured at the factory. Ultimately someone has to “own” the carbon used to produce the car. Seems like the owner makes the most sense. No?

    • Dave Alzayer
      Aug 20, 2009

      What about the fact that know one is talking about how the oil companys get a pollution credit for every car taken off the road in the cash for clunkers program. The oil companys will not have to clean up there polluting smoke stacks if they recieve anought pollution credits. The Democrats in Washington have a hidden agenda that they dont wont the public to know.

      • Bill Chameides
        Aug 21, 2009

        Dave, Secret agenda notwithstanding, there are NO corporate pollution credits in the federal cash for clunkers program. It appears that some states have considered such an approach in their own car-early-retirement programs, but the companies get a pollution credit in these programs because THEY provide the funds for the new car purchase.

        • Dave Alzayer
          Dec 8, 2009

          Any company that receives a pollution credit in exchange for destroying older cars is side stepping the real problem. It makes no difference if the Government or The companies are providing the funds for a new car purchase, its still the wrong way to correct the problem. And the problem is not the older cars, but the large companies with their towering smoke stacks. Before the Government bought these “clunker” (with tax payers’ money) did they bother to test each and every car to see if they were gross polluters of CO2? The answer to that question is nope! Did the Democratic Government specify that funds received from trading in a “clunker” be used to purchase a domestic car only? That’s another big Nope. The number #1 brand of car that profited from the Clunker program was Toyota which has a parent company in Japan. Struggling GM and Chrysler could have used these sales instead of sending our money overseas. Sure Toyota has a plant in Ky. but the Japanese government taxes Toyota also, so buying one of these cars helps fund the Japanese economy. Since pick-up trucks and vans as well as semi-trucks don’t comply with the same emissions and MPG standards that cars do, they should be the target of Obama’s “Witch Hunt”.

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