Climate Change Source: Flickr, 1bluecanoe

Published on August 10th, 2009 | by Joe Walsh

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How ‘Cash for Clunkers’ is Adding Carbon

Flickr, 1bluecanoe

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By most accounts, the Obama administration’s “Cash for Clunkers” program is a resounding success. You’ve heard the sound bytes: “good for consumers, good for dealers/the auto industry/the economy, good for the environment.” There was some embarrassing attention focused on the program during its second week as consumer response overwhelmed everything from the dealer interface system to the rebate financing that the government initially allocated.

As the program’s future hung in the balance, some dealers were left holding clunkers without a guarantee that the rebates would ever be paid, and as administration officials promised a hollow-sounding “good faith effort” to pay off all the deals already made, those dealers began to call customers to claw back the new cars or request cash payments to offset the rebate.

But, when the Senate approved an additional $2 billion before heading home for summer recess, it seemed that the narrative could revert back to praise for a program that worked. Dealership showrooms are humming again. Americans are driving snazzy new wheels and claiming as much as $4,500 in rebates for their old cars, actually worth much less. And then there are the environmental benefits of getting all of those clunkers off the road…or, are there?

Green critics have been circling the program since it began in late July, focusing mostly on concerns that ‘Cash for Clunkers’ does not require high enough fuel economy for the new vehicles that are eligible for the program.

Now comes Harvard economist Edward L. Glaser with a criticism from the behavioral economics camp in his weekend Boston Globe op-ed. Glaser’s point? If Americans derive more pleasure from driving newer cars, they are likely to drive more. Not to mention that they will be getting better gas mileage that will make leisure drives, long road trips and the daily commute much more affordable. As a result, even if they are driving more fuel efficient vehicles, “Cash for Clunkers” might not have a net GHG-lowering impact. There goes one leg of the economy/consumer/environment stool.

Economists have been taking the hacksaw to the other two legs as well. They contend that the program is probably not stimulating automobile purchases as much as accelerating and temporally confining them. In other words, what would have been fall or winter purchases became late July buys. So much for genuine stimulative economic effect.

As for consumer benefit, some critics argue that the program takes tax dollars to subsidize the purchase of new vehicles by people who can otherwise afford them but were just waiting for the right push while doing nothing to enable the poorest Americans to buy new cars because they still cannot afford or get financing for a new car, even with the rebates.

That criticism flows back into the questionable environmental benefit of the program since those poor Americans are likely to be driving the worst of the clunkers. Further, the so-called clunkers that others are trading in may be more fuel efficient than the vehicles that these low income drivers will keep on the road, but under the program’s rules, dealers have to disable those vehicles’ engines.

This all dovetails with Glaser’s criticism of what he calls the programs “clunky reasoning.” As Glaser notes, the program’s rationale seems to depend on “the mistaken view that the number of miles traveled is independent of the price or pleasure of driving.” Glaser cites the increase in public transit ridership during last year’s gas price spikes and proposes public transit subsidies as a better way to control GHG emissions since increased use of the subsidy (by increased ridership) does nothing to increase emissions, instead filling otherwise empty seats on already-operating buses. As we have heard from the $20 a gallon movement, Glaser makes the uncomfortable if obvious point that “a better way to reduce emissions is to make driving more, not less, expensive.”

This is a recurring problem in the explosion of energy-environment policy. For example, in Texas, utility green power programs are under-subscribed, leading to the possibility of a rate hike across the board to cover the loss. Similar problems are facing policy makers across the country and across the green tech spectrum.

How do we move toward large-scale integration of plug-in EVs? By placing charging stations in highly visible public spaces. But, who will pay for the electricity required to charge the vehicles in these public installations?

There are a whole bunch of things that technology has now made doable, but that does not mean we have policy, legal and regulatory regimes in place to make those things manageable. It does not seem likely that the US will slow its headlong rush into clean energy conversion as new killer aps emerge from the green tech side daily. What we need now are some minds on the policy side – politicians, regulators, technocrats – to match the technological innovation with political will and inventiveness.

Photo credit: Flickr, 1bluecanoe




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About the Author

An award-winning energy and environmental law scholar, Joe combines professional experience in utility sector government, community and regulatory affairs with a background in security clearance-required military intelligence and offers unique insight and complex analysis of energy infrastructure, technology and policy in national security, international trade and climate change and carbon-restrained economics contexts. Joe was awarded the Suffolk University Jurisprudence Award for Outstanding Scholarship in Environmental Law for his work analyzing the pathways and obstacles to adoption of renewable energy in state, federal and international energy policy. ”Home Rule on the Ropes,” his paper on renewable energy zoning in Massachusetts is on SSRN’s Top Ten lists for the Journal on Urban Economics & Public Policy and the Journal of Public Policy. And, he was awarded Suffolk Law's 2009-2010 McCormack Scholarhship in recognition of excellence in research and writing, including his paper - "Coming up ACES?" - on the NAFTA and WTO implications of the national renewable portfolio standard limitation proposed in the Waxman-Markey energy bill. A research assistant on Westlaw’s definitive energy regulation reference, ”The Law of Independent Power,” Joe is also a former state legislative aide and US Army linguist who tested at professional profiency in Russian and Spanish. His writing on law, politics and policy is also featured on the blog at www.RedGreenandBlue.org and he runs a series on land use and zoning for energy infrastructure - entitled "Powering Past NIMBY" - for Renewable Energy World Magazine. Joe lives in Boston with his wife and two young children. In his spare time, Joe is the founder and curator of the corporate social responsibility network on LinkedIn, and is an avid runner who recently posted a personal best in in the Walt Disney World Half-Marathon in Orlando.



5 Responses to How ‘Cash for Clunkers’ is Adding Carbon

  1. dj says:

    Wow. Can you believe what an industry nay-saying has become? I don't ever remember a time in my life when there were so many people who come out of the wordwork just to snipe at other people's ideas.

    This one is a great example of letting the perfect be the enemy of the good. Is Cash-for-Clunkers a good idea? Of course! Any idiot can see that it's a good idea!!! But is it perfect? Might it even have some neglible negative side-effects? Maybe so.

    So then the nay-sayers would have us do what? Nothing?!? I wonder if FDR had to put up with this kinda crap.

  2. It is indeed strange… Joe, what statistic shows it's "adding carbon"

    Surely 69% fuel economy improvement is hardly going to add carbon.

    http://www.reuters.com/article/pressRelease/idUS2

    We should be celebrating getting al these 5 mpg to 17 mpg vehicles off the road.

  3. Joe Walsh says:

    Susan:

    Thanks for reading and commenting. As to statistics, it will obviously be some time before we have any statistics on the long-term impact of the CARS program. But, Mankiw's thesis is that you have to discount the mileage improvement by factoring in the the multiplier for increased miles driven. 69% sounds great, but I'll wait for some independent research rather than relying on a press release from the third day of the program.

    The numbers that we are getting now don't look good for the program's prospects as a sustainable economic stimulant or a long-term way of getting "clunkers" off the road.

    As Edmunds.com reported (http://online.wsj.com/article/BT-CO-20090811-710587.html), CARS rebates peaked in the first few days of the program, and industry watchers now have some concerns about a production bubble in auto manufacturing.

  4. Joe Walsh says:

    dj: Thanks for reading and posting the comment. I see your point. There is definitely a lot of negative commentary out there right now on this program. David Sanger on the NYT added his own like-minded piece to the fray today (http://www.nytimes.com/2009/08/12/us/politics/12sanger.html?_r=1&scp=7&sq=clunkers&st=cse).

    As to the perfect and the good, I don't think the analogy applies here. No one that I have seen is looking for a perfect program. They are saying that neither government dollars nor political will are fungible: politically, the WH can't afford any false starts, and on the financial side, it might have been better (not perfect) to spend $3 billion dollars somewhere else, like on mass transit or high-speed rail.

  5. Pingback: Cash for Clunkers Update: Game Over Monday Night

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