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Cash for clunkers: still looking pretty good
I’m not sure why it’s so hard for people to admit that the Cash for Clunkers program basically worked.
I mean, I know it seems like the ultimate boondoggle: let’s pay people to buy new cars! And let’s layer over some fairly lame mileage requirements to give the program a green patina! I myself was somewhat skeptical (although certainly not dismissive) of the idea when it was first mooted.
Now a new study from the University of Michigan (pdf) performs a regression analysis to predict what the average fuel economy of cars bought this summer would have been in the absence of the cash for clunkers program. The study concludes that C4C raised the average fuel economy of vehicles purchased by 0.6 – 0.7 miles per gallon.
Cue Edmund’s Green Car Advisor:
> Neither of the study’s authors discussed whether the slight improvement in average fuel economy that resulted from the clunkers program justified its cost to American taxpayers.
> However, another study concluded the program was a very expensive way to reduce carbon-dioxide emissions. Sivak and Schoettle’s work seems to support the earlier study.
But…the whole idea of a stimulus program is to spend taxpayer money. Early word suggests that the stimulus benefits of the program were modest but real. The fuel economy improvements are just a nice side benefit of the program, and it makes little sense to judge the program solely or even primarily by the criterion of carbon abatement cost.
Further, a 0.6 mpg jump in fuel economy isn’t really so slight. From 1987 to 2008, the average fuel economy of the U.S. fleet improved by only 1.2 mpg. *1.2 mpg over a span of 21 years!* In comparison, a 0.6 mpg jump in two months doesn’t seem so small. (Admittedly, there’s a difference between the average fuel economy of the entire fleet and the average fuel economy of new cars sold, but the comparison still provides some needed context.)
Joe Romm points out that the future gas savings will have some follow-on benefits:
> Lets assume the new cars are driven nearly 20% more over the next 5 years, and that the average price of gasoline over the next five years is $3.50. Then were only saving 140 million gallons a year or roughly $500 million a year. **The $3 billion program pays for itself in oil savings in 6 years. And most of that oil savings is money that would have left the country, so it is a (small) secondary stimulus.**
Cash for clunkers wasn’t a perfect program or even necessarily a great program. But it did what it was supposed to do, offered some real environmental side benefits, and didn’t cost a whole lot. And now that we see how responsive consumers are to incentives offered at the time of car purchase, let’s get started on that feebate progam. Whoooo! Feebates!