Christopher Knittel, at UC-Davis, has run some numbers on the “Cash for Clunkers” program and concludes that it is an expensive way to reduce carbon dioxide emissions:
The Cash for Clunker program aims to stimulate the economy, provide relief for automobile manufacturers and reduce greenhouse gas emissions. In this research note, I present estimates of the implied cost of carbon dioxide reductions under the Cash for Clunker program. The estimates suggest that the program is an expensive way to reduce greenhouse gases. This is true under a wide range of assumptions regarding the increase in fuel economy of new vehicles purchased under the program, how long the clunkers would have been on the road if not for the program, and whether we account for reductions in criteria pollutants. Conservative estimates of the implied carbon cost exceed $365 per ton; best case scenario parameter values suggest a cost of carbon of $237 per ton.
HT to Keith Johnson at the WSJ’s Environmental Capital, who adds that the government estimates Waxman-Markey to reduce carbon dioxide for only $28 per ton. Knittel acknowledges that the Cash for Clunkers program was intended both as a stimulus program and an environmental program, and he limits his attention solely to analysis of the environmental program.
Robert Hahn, back in the early 1990s, analyzed some early “cash for clunkers” efforts in California and concluded that a program targeted to high-pollution areas could produce net benefits. (Published as “An Economic Analysis of Scrappage,” Rand Journal of Economics, 1995.) Key parts of the analysis, Hahn says, are assumptions about the remaining life of retired vehicles – are you avoiding four years of future clunker-emissions or just two? – and the stringency and effectiveness of existing automobile inspection and maintenance programs, which may already be capturing the ‘low hanging fruit’ (i.e., forcing repair or scrappage of high-emitting vehicles that would otherwise enjoy a long life).
UPDATE: For the interested reader, Political Calculations offers a Cash-for-clunkers tool by which you can calculate how long it would take for taxpayers to obtain environmental benefits equal to program costs, and if you don’t like their assumptions you can easily substitute your own.