NCPA - National Center for Policy Analysis

THE HIGH COST OF CASH FOR CLUNKERS

August 27, 2009

The $1 billion set aside for the Car Allowance Rebate System (CARS), or "Cash for Clunkers," ran out quickly this summer.  However, congress has since refueled this popular stimulus program with another $2 billion — enough to buy a total of approximately 750,000 trade-ins, say Todd Myers, director of the Center for the Environment at the Washington Policy Center, and H. Sterling Burnett, senior fellow with the National Center for Policy Analysis.

CARS aims to encourage the purchase of more fuel-efficient vehicles by offering a $3,500 to $4,500 government-funded rebate to consumers who trade in vehicles that get  less than 18 miles per gallon (mpg) for new cars that get more than 22 mpg or new trucks that get at least 18 mpg. 

Three goals cited by CARS supporters are to:

  • Reduce carbon dioxide (CO2) emissions,
  • Reduce Americans' dependence on imported oil,
  • And improve urban air quality.

There is evidence that removing older cars from the road will cut air pollution, but any reduction in CO2 emissions or oil consumption will be minimal — and expensive, say Myers and Burnett.

Assume that each trade-in would have kept running for another 145,000 miles.  A clunker getting 18 mpg would use 8,056 gallons of gasoline to travel that distance, whereas a new car that gets 27.6 mpg would use 5,254 gallons.

  • Burning a gallon of gasoline emits 19.4 pounds of CO2; therefore, purchasing a new vehicle under CARS would reduce emissions by 24.7 metric tons over the expected life of the vehicle.
  • If the average government subsidy is $4,000, the cost per ton of emissions reduction is nearly $162 — more than eight times the cost on the European carbon market.
  • Using the more realistic assumption that the average buyer would purchase a more efficient car within three years (or about 36,000 miles) the cost per ton rises to $652.

Congress gave in to pressure to expand CARS despite the fact that it will accomplish little if anything to prevent climate change or reduce Americans' dependence on foreign oil, say Myers and Burnett. 

For text: 

http://www.ncpa.org/pub/ba674

 

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