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Democrats Reach Compromise on Cash-for-Clunkers

House Democrats have just reached a compromise on a cash-for-clunkers bill that would provide financial incentives for people to trade in their old gas-guzzlers for more fuel efficient vehicles.

From the Energy and Commerce Committee’s press release:

Under the agreement, consumers may trade in their old, gas-guzzling vehicles and receive vouchers worth up to $4,500 to help pay for new, more fuel efficient cars and trucks.The program will be authorized for up to one year and provide for approximately one million new car or truck purchases.The agreement divides these new cars and trucks into four categories.Miles per gallon figures below refer to EPA “window sticker” values.

:The old vehicle must get less than 18 mpg.New passenger cars with mileage of at least 22 mpg are eligible for vouchers.If the mileage of the new car is at least 4 mpg higher than the old vehicle, the voucher will be worth $3,500.If the mileage of the new car is at least 10 mpg higher than the old vehicle, the voucher will be worth $4,500.

:The old vehicle must get less than 18 mpg.New light trucks or SUVs with mileage of at least 18 mpg are eligible for vouchers.If the mileage of the new truck or SUV is at least 2 mpg higher than the old truck, the voucher will be worth $3,500.If the mileage of the new truck or SUV is at least 5 mpg higher than the old truck, the voucher will be worth $4,500.

:New large trucks (pick-up trucks and vans weighing between 6,000 and 8,500 pounds) with mileage of at least 15 mpg are eligible for vouchers.If the mileage of the new truck is at least 1 mpg higher than the old truck, the voucher will be worth $3,500.If the mileage of the new truck is at least 2 mpg higher than the old truck, the voucher will be worth $4,500.

:Under the agreement, consumers can trade in a pre-2002 work truck (defined as a pick-up truck or cargo van weighing from 8,500-10,000 pounds) and receive a voucher worth $3,500 for a new work truck in the same or smaller weight class.There will be a finite number of these vouchers, based on this vehicle class’s market share.There are no EPA mileage measures for these trucks; however, because newer models are cleaner than older models, the age requirement ensures that the trade will improve environmental quality.Consumers can also “trade down,” receiving a $3,500 voucher for trading in an older work truck and purchasing a smaller light-duty truck weighing from 6,000 – 8,500 pounds.

Environmentalists will most likely be disappointed by this compromise, which draws on two competing bills. The weaker of the two original bills, sponsored by Rep. Betty Sutton (D-Ohio) and preferred by the auto industry, required that the new vehicle get at least 27 miles per gallon, while the bill favored by environmentalists mandated that the new vehicle be at least 25 percent more fuel efficient than the average vehicle in its class.

But according to standards imposed by the Department of Transportation in March, the average efficiency for cars and light trucks in 2011 will be 27.3 mpg. This compromise bill requires that a car get just 22 mpg in order for its new owner to receive a $3,500 voucher.

The clear winner in this arrangement is the auto industry, which will likely see its sales rise as people take advantage of the new incentives. The environment, it appears, will have to content itself with a distant second place.

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