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Does Cash for Clunkers Offer a Triple Impact?

Tori Okner | Wednesday August 13th, 2008 | 3 Comments

clunker.jpgWill Uncle Sam pay those in need to reduce emissions and stimulate the economy? Would it work?
A recent editorial in the New York Times drew attention to a stimulus proposal that exemplifies the intersection of the triple bottom line and continues to fuel discussion.
Professor Alan Blinder suggests implementing a “Cash for Clunkers” program, recommending that the federal government offer a buy-back rate above market value for the oldest cars on the road. Older cars emit a disproportionate amount of emissions. Binder highlights a California study that found that “cars 13 years and older accounted for 25 percent of the miles driven but 75 percent of all pollution from cars.” With prices at the pump sky high, Blinder’s proposal may attract those struggling to fuel their old gas-guzzlers – in all likelihood people in lower income brackets. The profit from a clunker sale is intended to function as a stimulus payment, supplementing consumption spending for those hardest hit by the economic downturn.


Pilot programs in several U.S. states have been generating a lot of press, with many, including hybridcars.com, excitedly noting the $3,500 offered for clunkers to low-income Texans. Blinder uses the Texas price as a high-end example for a program that would retire two million clunkers and cost the government around eight billon dollars a year. He stipulates that the government must “either sell the cars it buys to licensed recyclers for scrap, or refit them with new emissions controls and resell them.” Proponents believe that these purchasing programs would offer the government a relatively affordable mechanism for decreasing pollution and availing a low cost stimulus.
Skeptics challenge the merits of the program, questioning the definition of a “clunker” and expressing concern about long-term distortions to the auto market. Would a buy-back program for cars thirteen years and older provide an incentive for people to hold on to their old cars? Folks who may otherwise junk a car after ten years, for instance? Times blogger and Freakonomics author Stephen J. Dubner explores these and other questions in a recent post, drawing two conclusions: “Policies which might be a good idea if implemented as one time, short term programs, can be much less attractive if made permanent…[and] it is extremely difficult to deal with negative externalities (in this case pollution) by subsidizing them (as this program does).”
U.S. policy analysts can look up to Canada beginning in 2009. The Canadian Environment Minister, John Baird, recently announced a federal partnership to expand the Clean Air Foundation’s Car Heaven Program. Globe and Mail reports that the current program is mainly funded through corporate partnerships with General Motors and Imperial Oil. Canadians who scrap their cars, 13 years and older, earn $750 towards a new GM vehicle. The Star reported that The National Vehicle Scrappage Program, as the new policy is named, will expand the scope of the incentives, offering “rebates on new vehicles beyond GM, as well as free transit passes, bicycles, membership in ride-sharing programs and $300 cash.”
Weigh in: Cash for Clunkers – policy trifecta or policy chimera?


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  • Juan Cruz

    Great article!

  • J

    Someone who has little $ and wants to scrap their car is going to wait 3 years or any years?!!!! Have any of you ever been poor? Enough said!

  • J

    Someone who has little $ and wants to scrap their car is going to wait 3 years or any years?!!!! Have any of you ever been poor? Enough said!