Cash for Clunkers: $416 Per Ton of CO2 Reduction
Christopher R. Knittel of UC Davis has a paper (pdf) looking at likely CO2 reductions from cash-for-clunkers under a variety of assumptions. The $416 figure per ton of CO2 avoided may actually be low, as it does not include the well-documented rebound effect of people with higher MPG cars driving more miles**. Also, he admittedly assumes that cars being turned in will have average future driving miles for a car of similar age, though there is anecdotal evidence that in fact the cars being turned in are driven less than average. Under these assumptions, the cost may be as high as $600-$1000 per ton.
The analysis looks pretty thoughtful, with the proviso (which the author is the first to make) that data on the program and cars bought/turned-in is still sketchy. The interesting part was that there were no reasonable assumptions that even got the price within an order of magnitude of the $28 per ton clearing price the CBO estimates under cap-and-trade.
As a CO2 reduction program, this is the equivalent of the military's $700 toilet seats. But of course we all know that no one ever really considered this an environmental or even stimulus bill. This was always first and foremost 1) another Easter egg subsidy for the middle class and 2) a back door way to subsidize GM and Chrysler to try to make the Administration's investment in them look better.
** This is straight supply and demand -- reduce the cost of miles driven, and people will drive more miles.
Fred from Canuckistan . . .:
Wonder what the cost will be in reduced business for auto parts suppliers, auto repairs etc.
People with clunkers visited their friendly mechanic or auto parts store a a lot more if they own a clunker.
August 12, 2009, 2:31 pmNorris Hall:
JD Powers forecasting firm may raise its outlook for 2009 U.S. industrywide sales by 200,000 units, taking into account the runaway success of the U.S. government's "Cash for Clunkers" incentives to trade in old gas guzzlers for more fuel-efficient vehicles.
August 12, 2009, 4:05 pmNyfarmer:
The program is a very short term feel good program for a lucky few auto buyers. For the national fleet to be replaced every 20-22 years about 7-10 MILLION cars have to built every year. In an off year I would venture a guess that sales might be half that number. A catastrophe for auto builders no doubt. This program will move about 750 THOUSAND cars as currently funded. These cars may have been bought regardless and the program will still net the auto industry a dismal year BECAUSE THE TOTAL NUMBER OF CARS SOLD FOR THE YEAR WILL NOT RISE!!! I have not seen a decent critical analysis of the auto business in any of the msm outlets! This type of program has been tried in the dairy industry over the last 20 years to improve the pay price to farmers for milk to no effect. The government instituted a buyout--slaughtering milk cows to try to shrink supply (of milk)--the 'successful' bidding producer is paid for a year of milk production and the slaughter value of the animals. But wait there's more! This program was done only once by the government. Our corrupt co-op system picked up the standard by forming CWT (co-ops working together). Dairy producers pay into a fund $.10 for every hundred pounds of milk sold and periodically roll out a buyout when milk pay prices plummet. A buyout is currently underway to remove about 87,000 cows on 300+ farms nationwide. I do not anticipate a marked increase in my pay price for milk. The problems within the industry are far more complex for such a simple fix. (Investigate something called MPC's or milk protein concentrates for starters! You may not allow your child a pizza again.) So the next step for the auto industry will be to collect a 'fee' on every auto sale and periodically roll out feel good payment to the lucky few!
August 12, 2009, 8:19 pmMJ:
Hey Obama, those are some pretty expensive windows you're breaking.
August 13, 2009, 7:50 pm