Cash for Clunkers Reduces Emissions — For Free!
The Wall Street Journal has a piece today called “Cash for Clunkers: An Expensive Environmental Fix,” which argues that despite its bigger-than-expected environmental benefits, the soon-to-be-renewed vehicle upgrade program is a costly way to cut carbon emissions. The author writes that the effective price per ton of carbon emissions reduced is between $160 and $475 — much higher than the likely cost of carbon under a cap-and-trade regime.
But Joe Romm counters that the program will pay for itself in less than five years, and so we’re essentially making environmental gains at no cost. Cash for clunkers is expected to save around 72 million gallons of gasoline each year. At $3 a gallon (Romm considers this a conservative estimate for the coming years), that amounts to $216 million in annual gasoline savings. At this rate, the $1 billion that’s been allocated to cash for clunkers so far would be more than paid for in a half decade.
Romm maintains that cash for clunkers is not primarily an environmental program, though its green benefits are certainly a plus. Instead, it has important economic and national security implications:
The majority of the $200+ million a year in gasoline savings would have left the country, since we import nearly 2/3 of our oil (and probably a higher fraction of marginal increases in oil use). Now that money stays in the pockets of consumers, who will save some of it and spend the rest of it, circulating most of the money in this country rather than overseas.
Liberal environmentalists have been highly skeptical of the program’s modest fuel-economy provisions, which require an efficiency improvement of just 4 miles per gallon. But so far, the average gain from the program’s trade-ins has been nearly 10 miles per gallon. Despite quibbles over the details, there seems to be a growing consensus about the program’s overall effectiveness.