Published on August 10th, 2009 | by Joe Walsh5
How ‘Cash for Clunkers’ is Adding Carbon
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.