Rahm Emanuel said: “You never want to waste a serious crisis.” In other words, use the momentum of addressing one crisis to advance other important policy objectives. That’s what the "cash for clunkers" bills rattling their way through Congress will do, right? Maybe not.
Representative Betty Sutton (D-OH) and Senator Dianne Feinstein (D-CA) have both proposed so-called “cash for clunkers” bills. The idea behind them is buy a brand new car, scrap the old gas-guzzler, and the government hands over a nice check to offset the purchase cost.
Sounds like a great deal all around.
- You get a new car at a reduced price — good for you;
- The automobile industry gets to sell a car — good for the economy; and
- A gas-guzzler is replaced by a fuel-efficient car — good for the climate.
The Center for American Progress hails these bills for “help[ing] beleaguered automakers, lower[ing] our dependence on foreign oil, and clean[ing] up the air we breathe.”
Sorry to be a party pooper, but I’m not convinced about that lowering foreign oil dependence and cleaning up air stuff.
The Sutton Bill
The bill put forward by Rep. Sutton (H. R. 1550) has major problems. Reportedly, it would provide $3,000-$5,000 vouchers to consumers who purchase a new car with at least 27 miles per gallon (mpg) on the highway (for trucks it’s 24 mpg) and scrap a car that is at least eight years old.
First of all, the 27 mpg requirement is a joke. The corporate average fuel economy (CAFE) for all cars sold in 2009 is 27.5 mpg — for both highway and city. So a 27 mpg limit is below half of all the U.S. cars that will be sold this year. If the bill is to encourage fuel economy, why set the limit below the average — wouldn’t above the average make sense?
And what about the requirement that the clunker must be at least eight years old to scrap it? The problem with that is there’s no guarantee that the old vehicle is really inefficient in terms of fuel. The CAFE standard for cars sold in 2000 was the same as the CAFE standard for 2009 cars. Given the bill's paltry 27 mpg requirement for the new car, there is a more than 50 percent chance the scrapped car has better fuel economy than the new one.
Clearly the Sutton bill needs some work before it hits prime time.
The Feinstein Bill
In contrast, the Feinstein bill (S. 247) appears to have some teeth in it. It provides cash incentives (between $1,500-$4,500) for buying a car that exceeds the government's fuel-efficiency standards by at least 25 percent (or about 34 mpg given the current CAFE standard) and scrapping a car that gets no more than 18 mpg. (For more details, see this white paper [pdf] prepared by the American Council for an Energy-Efficient Economy.)
This is good. It will almost certainly put more fuel-efficient cars on the road. But the greenhouse gas benefits are less clear. How long it takes to get a carbon benefit depends on the fuel economy differential between the two cars.
When Does a New Fuel-Efficient Car Lower Greenhouse Gas Emissions?
- Years needed to pay back the CO2 emissions from scrapping an 18 mpg clunker and buying a new car as a function of the new car’s mpg rating. The arrows show the minimum mpg's required for both a new car and a new light truck under the Feinstein bill. Assumptions: embedded CO2 in the manufacture of a new car is 6.7 tons. Car is driven 13,000 miles per year.
Scrapping an old car for a new one doesn’t guarantee a lower carbon footprint even if the new car gets better fuel economy. The reason: manufacturing and delivering the new car consumes energy, and producing that energy involves greenhouse gas emissions. The amount of carbon dioxide (CO2) emitted to produce a new car has been estimated to range from about 3.5 to 12.5 tons, or an average of about 6.7 tons.
So buying a new car means an extra 6.7 tons of CO2 emissions — you wouldn’t have emitted all that pollution had you just kept your old car. Assuming your new car is more fuel efficient than your old car, you offset or work off that 6.7 tons down by driving your new car. But that doesn’t happen immediately. You have to drive and keep on driving until the amount of CO2 you save from driving the new car instead of the old car equals the 6.7 tons needed to manufacture your new car.
The time it takes to completely offset the 6.7 tons is the CO2 payback time. Clearly the more fuel efficient your car is relative to the old one, the shorter is the payback time. How much shorter? Here’s an example.
Suppose your old vehicle gets 18 mpg (the maximum allowed in Feinstein’s cash-for-clunker bill). The graph above shows the CO2 payback time as a function of your new car's mpg.
Feinstein’s bill stipulates that the new car must be at least 25 percent more fuel-efficient than the government’s current standard, which is 27.5 mpg. So that means your new car must get at least 34.375 mpg. As you can see from the graph, the payback time will be less than three years for cars — which is a good deal for the climate.
(The fuel economy standard for light trucks is 23.1 mpg, which would mean your new car would have to get a minimum of 28.875 mpg to qualify under Feinstein’s program. And so the payback time for these cars will be a bit longer.)
Feinstein's bill also includes a cash incentive for those who scrap their old car in favor of public transit. (See details in Sen. Feinstein's press release.) Taking the old gas-guzzler off the road and not replacing it with a car at all of course would pack the biggest, most immediate climate benefit.
Bottom line: Not all cash-for-clunkers are created equal. To make it work, you have to insist on a significant miles-per-gallon differential. Anything less is a waste of a serious crisis.
