Is Buying Up the Country's Clunkers Smart, Eco-Friendly Policy?
by Jeremy Elton Jacquot, Los Angeles on 07.26.08
Image from Bogdan Suditu
I admit upfront that I'm no economic whiz -- in fact, far from it -- so you'll have to take my "analysis" of Alan Blinder's national "Cash for Clunkers" policy with a (heavy) grain of salt. Put simply, it seems like a great idea to me and, unlike many of the other eco-friendly policies I've read about that show promise, might actually be politically feasible.
Basically, the idea would be to have the federal government buy up many of the country's oldest, most polluting cars and scrap them; the owners, who would likely
be lower-income individuals, would be paid at above-market prices and allowed to spend the money however they would see fit.
By removing the most polluting vehicles from the roads, which account for 75% of all pollution from cars (while only accounting for 25% of all miles driven) according to Blinder, and disbursing cash to low-income households, the policy would help to both dramatically reduce emissions and alleviate income inequality. He points out that those lower-income consumers, who tend to live paycheck by paycheck, would be more likely to spend the money immediately -- providing a welcome boost to the economy.
Here's how he foresees the policy working in action:
The government would post buying prices, perhaps set at a 20 percent premium over something like Kelley Blue Book prices, for cars and trucks above a certain age (say, 15 years) and below a certain maximum value (perhaps $5,000). A special premium might even be offered for the worst gas guzzlers and the worst polluters. An income ceiling for sellers might also be imposed — say, family income below $60,000 a year — to make sure the money goes to lower-income households.The numbers in this example are purely illustrative. By raising the 20 percent premium, lowering the 15-year minimum age, or raising the $5,000 maximum price or the $60,000 income ceiling, you make the program broader and costlier — and create a bigger stimulus. By moving any of these in the opposite direction, you make the program narrower, cheaper and smaller.
More important, he notes that similar programs are currently or have been in operation in several states, and that they have already shown measurable success. He believes that a national program -- one that would buy out at least 75 million clunkers (reasoning that 30% of the nation's 250 million cars and light trucks are 15 years old or older) for an average purchase price of $3,500 -- would cost less than $20 billion, at 5 million cars a year. This would be a much better deal than the $168 billion stimulus package that was enacted by the Congress earlier this year, he argues.
Some of these numbers are likely to change and there's still the question of how the government would scrap all those cars, of course, but, on the whole, it seems like a good proposal. With energy prices on the upswing, low-income individuals may opt to take the cash and switch to public transit (instead of buying a new car), or, if they do decide to buy one, at least trade up and get a more fuel-efficient hybrid vehicle. I'm curious to hear what some of you policy and econ mavens have to say.
Via ::The New York Times: A Modest Proposal: Eco-Friendly Stimulus (news website)
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I know Texas has a program in place called Drive a Clean Machine, it does not buy your car but it does give you money to buy a newer car (up to $3,500) in the most polluted areas in texas in order to help better control the air pollution and smog.
I know this because I designed the programs logo:
http://www.tceq.state.tx.us/assets/public/implementation/air/ms/logocontestwinner.jpg
I think its a great program and I would fully support something like this on a national level!
Better than a handout, in terms of helping the poor and reducing pollution. But still an awful lot of money wasted. Still better than wasting it as a tax-cut handout.
Anyone driving a clunker is probably doing so not from choice, but from lack of funds.
Further, any vehicle over 15 years old is probably worth under $1,000, if not WELL under that amount. So even paying 20% over for a $500 car is still only $600, which isn't going to be anywhere near enough to get them into a newer, more efficient car.
It could be a down-payment on a loan, but if they could afford a loan, they would have already traded up and they wouldn't be driving the clunker. And I doubt an extra $100 on a $500 car is going to tip them over into the action desired.
On further consideration, I think we'd be better off with a federal $2,000 tax credit on high-MPG high-efficiency vehicles, hybrids or otherwise. Say, 40 MPG or better.
Double it if you buy a new 40+ MPG vehicle AND trade in a truck or SUV that's currently getting 15MPG or less.
We need folks at the upper end buying hybrids and other cars so that, eventually, they'll work their way down the chain and later become cheap--and efficient--transportation.
And we need to help compensate middle-class folks who're upside down on gas-guzzling trucks and SUVs.
LTs and SUVs make up 40%, but since their mileage sucks they burn 55-60% of the fuel. I say get THEM off the road, and we save gas AND reduce pollution at the same time.
Just a reminder: The "75% of all pollution" referred to in the article trfers to smog forming emissions, not carbon dioxide emissions. The NYT article doesn't make the distinction either. Dan B
I'd be wary of anything like that. I know a guy who bought 3 clunkers for under $1,000 -- an old van, an old volvo sedan, and an old moped. He uses the highly polluting van very rarely. He uses the volvo when he needs to take his family around or carry heavier thing. He uses the moped for work and transportation daily. While some will have a big problem with the 2 stroke engine, getting 140mpg is more eco friendly than pretty much anything else. I think targeting certain particularly bad cars is a problem but when used right clunkers can be better for the environment than any new hybrid... and as mentioned by others people with clunkers aren't doing it to pollute they're doing it to save. I think rich people with classic cars should be a bigger target since they are less likely to be worried about gas prices and use a lot of excess fuel in their old fuel inefficient cars rather than the working person who wants to spend as little as possible overall. Producing a new car takes a lot of energy.
Basically, you can't green the world by burying the poor in the dirt.
This is a really interesting idea, its pretty difficult to hold an argument against.
to bad we can't get some more politicians to read treehugger like the daily paper
Years ago, the federal government paid scrap dealers for every 70s "gas hog" they bought & crushed. One of the best ways to rid the roads of inefficient vehicles, is to remove any and all tax subsidies for that type vehicle. However, there are always going to be clunkers, because poor people cannot afford anything else.
I personally think scrapping older vehicles is a lame excuse for "helping to save the planet". I have an invention that will use older vehicles, and make them totally non-polluting, non-emitting vehicles. If my company "recycles" all the old cars and trucks for the "low-income" owners, at a cost they can afford, roughly 1/6th the cost of a Ford Escape Hybrid, wouldn't that save a lot more? The vehicle owner gets to "keep" that old Pickup that grandad gave them, refinance it if needed, and when they get it back from Me, they'll never have to put fuel in it again. And maybe our tax dollars will go towards something useful, I said Maybe!
In addition to tax credits for buying a fuel-efficient vehicle I would like to see governments give tax credits to people who use public transit. It would be easy to keep track of, electronic card swiping machines, for examiple, and provide a reward for people who are using transit instead of commuting alone to work in traffic as most people are doing today.
While I agree with the idea in principle, the suggested implementation falls short. Whenever the government gets into the business of buying and selling things the taxpayer gets screwed. A simpler approach would be to have the owners take their cars directly to the scrap yards, where the car title is marked as 'junked', and the owner gets a certificate from the state motor vehicle department. The owner sends a copy of the certificate to the government to get a check - the government is good at writing checks. Income should not matter, since most wealthier people drive newer cars anyway. If the goal is to get older cars off the road, then keep it simple and leave it at that.
The basics of the program make great sense. Older, poorly maintained cars pollute the most. Helping people move up into newer, more efficient cars is beneficial.
A program that is mildly generous on purchase price would be great. But it should be based on the cars not passing emissions tests and the price should be capped at Blue Book price with an upper limit of, say, $1,000.
Cars would need to be operational and currently licensed, and driven to an inspection station.
Run the program for a year or two and see what the result is. Modify as needed.
The down side of a program like this is that it puts a floor under the value of every car.
But it has more impact to remove a car spewing 500 times the current emissions limit, than to reduce the pollution of new cars by ten percent. Of course, you can do both.
"low-income individuals may opt to take the cash and switch to public transit (instead of buying a new car), or, if they do decide to buy one, at least trade up and get a more fuel-efficient hybrid vehicle."
Michael got it in one - the poor don't need cash, they need cars.
Buy a hybrid? You have to buy new and at well over sticker price, right now these are for the rich...
Finally, another Federal bailout, this time for clunkers? Brother...
This is a great, cost effective way to reduce urban smog in areas where that's a problem. However, it's nowhere near as effective for reducing oil consumption or CO2 emissions. It's the wrong strategy for tackling that problem.
What Blinder, as an economist, may not understand, is the descriptions of the effectiveness of the program such as "The Texas program estimated that clunkers spew 10 to 30 times as much pollution as newer cars," refer to smog emissions and not CO2 emissions. In order for CO2 emissions to be 10 times higher, the fuel mileage would need to be 10 times lower: 2-3 mpg.
A possible effect of this program in present circumstances would be that people would sell their clunkers and buy the lowest-price used vehicles on the lot, which are SUVs right now. This would help facilitate the elite selling their SUVs and getting hybrid, but at the same time lower income people would be stuck with the worst gas guzzlers, and may find that what they were paid for their clunkers is not enough to cover the gas cost of the SUVs.
Perhaps what we need to do is buy up old trucks that are used by businesses for deliveries, contractors work vehicles, etc., so that they can buy the SUVs that the elite are ditching. The SUVs might be a little more efficient and are probably plenty big enough to replace some rarely-full larger trucks. (If people in other parts of the world can use motorcycles for cargo--see the link from my name for example--an SUV should be big enough for a lot of purposes.) And that can facilitate a shift to smaller passenger vehicles.
When fuel hits $10 a gallon, the economics will be in place to scrap all the current vehicles and make way for 100 MPG cars. Replacing all the clunkers in America, thats what I call an economic stimulus package.
My current car is a 1999 VW Beetle, it only gets 28 mpg, why? I find it hard to believe that its the best one could do with mpg. Speed means nothing to me, as my love bug never goes over the speed limit, any way.
Umm, isn't the federal government broke? Or, if it isn't actually penniless today, won't it be by the time the bank and airline and auto manufacturer bailouts are complete? Maybe we can hold bake sales (if we can afford the flour) to put every American behind the wheel of a hybrid! That'd be awesome!
I read an intriguing article in Car Driver in the '90s, before Climate Change was widely understood. The author suggested that the most effective way to reduce car based pollution(smog etc.) would be to use a sensor technology to identify the small number of cars that produce the overwhelming amount of pollution, and then gov't would pay to either fix the problem on the car, or simply replace it with a comparable newer model equipped with modern pollution control. The author calculated that this kind of government funded program would actually be cheaper and more effective than forcing ever more stringent pollution controls on new vehicles, which are already quite "clean", and waiting for the cleaner cars to trickle down to lower income drivers.
Tackling climate change is much harder: massive investment in public transit; redesign of cities to reduce dependence on vehicular transport; smart, green electric grid powering electric vehicles; overhaul of agricultural, and meat production systems, etc., etc. Switching to hybrids, while worthwhile, is a band-aid on a severed artery. We need to get to work.
Seems to me that the best place to put government (our) money at the time is in developing affordable high mileage or non-fossil fuel propelled cars for people with more limited budgets.
Within the next year or so we are likely to see whether the air car is 'real'. Tata Motors has announced that they are bringing one to market. If it works then this is the answer to many lower income people's needs, no expensive batteries.
If the air car works, then use government funds to speed their introduction into the US. Make low cost loans available for plant conversion in Detroit. I'd bet Tata would be willing to license their technology to some US manufacturers. (Or buy out some existing plants.)
If it doesn't pan out then the best approach might be to fund the transition to carbon fiber chassis cars. Fuel efficiency is about weight and aerodynamics. Carbon fiber would drastically cut the amount of mass in the typical car. The switchover from steel to carbon fiber is going to be expensive, but after the change takes place the unit cost should be approximately the same and the energy needed to propel the car much less.
Use government money to jump hurdles.
People upside down because they bought a huge SUV/pickup for no good reason? Too bad for them. I don't want to spend my tax money covering their mistake.
I've been looking at this issue for sometime; and wondering how this would work. The idea has some merit, but as another person indicated, it probably wouldn't help low-income people as much UNLESS they do have access to public transit. But I wonder, with the growth of ZIPCAR if a trade-in could include compensation along with a 1-year membership with Zipcar.
I am an SUV owner. My vehicle is a 2003 with 31K miles on it. I have the advantage of living near public transit, which I take most often. There are certain out-of-the-way places that I do need to drive. But I would consider the buy-back program and use zipcar, which is accessible to me.
We have this exact program in BC Canada, it called "scrap it".
It works really well and instead of cash you get eco frindly incentives, ie a bus pass or voucher for a new bike.
Scrap is worth a lot these days and will probably only go up. I suspect these incentive dont actually cost the govt. that much anyway as they get some buy in from Car dealers, bike shops and transit.
In short, IT WORKS!
There is an alternative idea available for getting clunkers off the road.
Canada requires an emissions test on each car periodically. If it does not pass, the car cannot be driven. This ensures people keep cars in good condition, and also eliminates the worst polluters.
Simply increasing the stringency of the "pass" standards will eliminate even more old clunkers.
It works.
Artificially inflating the price of a clunker by 10% may be counterproductive, and just make money for car lots with tradeins.
I agree with the need for a periodic emissions test. I see so many polluting cars in the horrible state of Arkansas it just makes me sad. I know more times than not it's because the people cannot afford to trade up.
If we had more mass transit, we probably wouldn't be SO focused on more fuel efficient cars.
I'd rather the government work on building a world class mass transit system to get people around rather than further funding the private vehicle.
Just a comment WRT the "rich people with Classic cars". As an owner of two classic cars, the point is to NOT drive the car. Owning and maintaining classic cars is about enjoying the car not commuting. Low miles = higher value. Not to mention that these cars are usually fragile and expensive to maintain. In addition, Most classic auto insurance is extremely expensive if you drive more than 2500-5K miles per year. Most don't even drive that.
Lets add that there are just not enough classic cars to even make a dent. These cars are rare. The owners are car lovers who take an active interest in legislation like the one described above. Consider instead engaging with them to help craft a bill that protects classics. You might be able to enlist the help of some of the powerful people who own and show classics.
You might want to investigate options before alienating a group that might be willing to help.
My question in all of this is has anyone considered the fact that these old "clunkers" still run and that in that they arent taking up extra resources in other places? Sure they use more gas but keeping and old car that still runs and will probably run for a while longer is more efficient that making a whole new car.
Unless the government is planning on retrofitting some of these cars or selling them at cost back to people to retrofit or make more efficient (fat chance on either of those) dont we miss out on the fact that we are still consuming more metals and petroleum based plastics in the new cars?
What about the environmental impact of building a new car? Some of the newer hybrids especially use a lot of plastic and battery packs which can prove to be environmentally problematic in the long run.
My thought is that instead of paying people lets educate them. If a guy can get almost 60mpg out of a civic then surely anyone can increase their miles to the gallon on whatever they might be driving. Its all about telling people how to save gas and make their cars last until they cant be driven anymore then buying something newer with the money saved.
Another alternative:
If our goal is to increase the use of hybrids and electric cars, why not some sort of conversion program for the clunkers. Maybe the car companies should come up with some sort of conversion service. People with clunkers could bring them in to be converted to electric cars, and pay a lot less than they would have to pay for a new car. It would keep the landfills from getting too full of old cars. It would help the poorer people who can't afford a hybrid or new electric. It would also help the image of the car companies. And the car companies wouldn't immediately have to pay a fortune to convert their factories to make electric cars.
I agree with the comments above.
I actually think it's also a pity to trash old cars. The not so old, I don't care much, but cars like the one in the picture, I do. Also, they were better built and that's why they're still around., even if the engine's technology wasn't that advance, the body was much stronger.
I believe thta a much better solution could be to replace the engines with newer, more efficient ones, as well as the transmission and any other needed part. It'll most probably be much, much cheaper, since buying in bulk, a good price can be gotten from the parts straight from a manufacturer, instead of having to convince every car owner of giving away their vehicle.
There's also the affection many owners may feel towards their car, so they'd be reluctant to sell it, but very willing to update it.
Ask metal and junk dealers what they pay for a car in scrap. I heard something like $400-$600 for a junk car nowadays. There's a lot of bulk metak in there.
In general, I would suggest getting acquainted with your local scrap metal dealer. If you have room, keep a bin or a space set aside, find stuff around the house (or one man's trash is another's treasure) build up the pile and go to the scrap place every 3 months or so for a few bucks here and there.
vsk
Ohio used to have a program called E-Check that required all cars' emissions to be tested before they were allowed on the road. People didn't like the program, so they got it on the ballot and had the program ended.
I don't see it as a way to help the poor with getting a better more fuel efficient vehicle. A slightly higher return on a piece on a clunker is not going to be a very good down payment on a hybrid or more fuel efficient vehicle though since most of the people who own them aren't driving them because of style.
If you live within the Memphis TN city limits you must have your vehicle pass a smog emissions left every year or not be able to get your license plate renewed. They are planning on expanding this onto the county to help reduce smog emissions since a majority of our city's pollution comes from people who live in the county but work in the city.
The owners of steel recycling centers could be given incentives and could bulk up the perks for local clunker car owners to recycle their older less efficient polluting cars. We are so overly dependent on owning a car, instead we should be writing local mayors and city council letters requesting clean public transit, safer bike routes and lanes, Read the book divorce your car , super informative. Local Cities could imagine this, have bicycle recycling and restoring centers where local residents could purchase a refurbished and tuned up bike at very affordable prices and the poor could receive vouchers for even further discounted rates , safe school routes connecting neighborhoods to schools through smart green planning with separated and protected bike routes, Eco wise - no gas, no oil changes, no insurance, no expensive fixes, no noise pollution, no air pollution , lower obesity , more community, less traffic problems- you could fit easily several bikes in one of Portland Oregon's bike lanes, Start Cycling in your City and lead the way to a greener and much healthier and more fun future for everyone. If there are no bike routes or paths, go to City Hall and ask if they have considered enhancing the Community with Bike Friendly Planing, write letters, send emails , start a critical mass , also most city transit have buses with bike racks, if not they have fold up bikes that are sweet choices. Greener world is a happier World
Excellent idea - should have received more social media love. Posted it to popfail.com - http://popfail.com/science/is-buying-up-the-countrys-clunkers-smart-eco-friendly-policy/
Just increasing the emissions requirements isn't a politically viable or good idea, as lower-income folks would bear most of the brunt of this. I recently junked my 15-year old Jeep after failing a smog test in CA, in part because California offers a $1000 check for junking failed cars through the Bureau of Automotive Repairs. This $1k then went toward my down payment on a Prius.
In my case junking the Jeep was simply easier than fixing and selling it (not necessarily more profitable), but with the way the energy economy is moving, we will have a LOT of drivable cars that need to get off the road, even just thinking about how much it would cost to continue refueling them. Keeping a 14mpg car on the road (with its concomitant emissions) is simply not environmental under current circumstances.
A modestly more aggressive policy like CA's, perhaps provided by the federal government (or even with more states joining in individually) could go a long way. And this type of program would dovetail nicely with more stringent emissions requirements.
Poor people need the transportation. In our cities we should offer a 100% premium for their cars in the form of public transportation passes.
What a crazy suggestion. I can't believe anyone could fail to see the huge gaping holes in the logic.
Aside from the practical problems - for example, adding complexity by means-testing the benefit?! - there are the real issues here: scrapping a car and replacing it with a new one will be much worse than keeping the old car on the road.
Is it more efficient for a person like me (with no money but a seriously old-fashioned sense of aesthetics) to spend hella cash on a new hybrid or to get a car and tool around with it and drive it only when i need to and look super good? I don't know. Making a new car, whether or not it's a hybrid fancy space egg, it doesn't look the same to me as an old ass pickup or volvo.
I don't dig this simply because new cars are not beautiful.
I kind of like this idea, but honestly only 20% over the blue book price is really nothing on an old car. For example, until about three weeks ago I was driving a 1985 Ford Crownvictoria, and it was worth about $500. Another 20% on top of that is nothing close to what a decent used car costs.
Also, like someone said most people that are driving these cars do not do so by choice. I'm a college student and trying work, go to school and pay the bills means there just isn't much money left over. Since I walked to class and only had to drive to work a tank of gas lasted me more than month even with the terrible 14ish mpg that I got, so fuel savings couldn't make up for the cost of a newer car. I also repaired the car myself, and fortunately I never had anything major go wrong, so I maybe put around $200 into the car a year. Fortunately I finally saved enough to get a much newer car with about a 30mpg fuel economy.
I kind of like this idea, but honestly only 20% over the blue book price is really nothing on an old car. For example, until about three weeks ago I was driving a 1985 Ford Crownvictoria, and it was worth about $500. Another 20% on top of that is nothing close to what a decent used car costs.
Also, like someone said most people that are driving these cars do not do so by choice. I'm a college student and trying work, go to school and pay the bills means there just isn't much money left over. Since I walked to class and only had to drive to work a tank of gas lasted me more than month even with the terrible 14ish mpg that I got, so fuel savings couldn't make up for the cost of a newer car. I also repaired the car myself, and fortunately I never had anything major go wrong, so I maybe put around $200 into the car a year. Fortunately I finally saved enough to get a much newer car with about a 30mpg fuel economy.
This is nonsense. Why should I subsidise someone else's crapmobile? If a vehicle doesn't meet minimum standards, then the owner should spend HIS money on either bringining it into proper repair, or scrap it.
So what if it's "beneficial"? It's beneficial to the public health and safety that my own vehicle doesn't have bald tires, and the headlights and brakes work. Can I get a nice taxpayer subsidy to cover those costs?
No penny, no candy.