Looking Under the "Cash for Clunkers" Hood

This is a guest post by Jesse Prentice-Dunn of the Sierra Club Green Transportation Program.

Cash for Clunkers ended with a bang this Monday, finishing a frantic month for dealers and consumers alike. Now that the dust is settling, lots of people are asking “What really happened?” A quick glance at statistics released yesterday by the Department of Transportation (PDF) reveals quite a bit.

Participating consumers valued fuel economy. Clunkers traded averaged 15.8 miles per gallon (mpg), while vehicles purchased averaged 24.9 mpg. The 9.2 mpg difference means that the average consumer increased the miles per gallon of their vehicle by 58%.

Consumers replaced trucks and SUVs with cars. Of the vehicles traded in under Cash for Clunkers, 84% were trucks and SUVs, while 59% of purchased vehicles were cars. Furthermore, the top 10 models that were traded in were all SUVs and trucks; conversely, nine of the ten best selling models were cars.

The program spurred auto sales (including domestics). This $3 billion program resulted in sales of 690,000 new vehicles. Of these vehicles, 38.6% were manufactured by the Detroit 3. General Motors and Ford sold the second and third most vehicles under the program of any manufacturer, respectively.

Clunkers brought fuel economy and its benefits to the dinner table. Now for something that isn’t as easily quantifiable. Cash for Clunkers captured the public’s attention in a way that few government programs have. It was widely discussed, heavily covered in the media, and many rushed to participate. More importantly, the basic fuel economy requirements of the program created a national discussion and understanding of the benefits of efficient vehicles – reducing our dependence on oil, curbing global warming, and saving money at the pump.

A more efficient fleet will reduce global warming pollution. While the Cash for Clunkers program was designed primarily to stimulate auto sales and did not contain stringent fuel economy requirements, it is clear that consumer decisions over the short life of the program will result in reduced greenhouse gas emissions. Using our Sierra Club Cash for Clunkers Calculator, we estimate that the average consumer will save $664 per year at today’s gas prices and reduce emissions of carbon dioxide by roughly 2 tons. Given all the vehicles sold, the program will reduce oil consumption by roughly 186 million gallons and save more than $458 million.

In a more in-depth analysis, Dr. Rick Larrick at Duke University’s Fuqua School of Business estimates that, on average, vehicles purchased under Cash for Clunkers will pay down their carbon debt from manufacturing within the first 35,000 miles of driving and reduce greenhouse gas emissions thereafter.

So what’s under the hood? Over the past month Cash for Clunkers spurred sales of more efficient vehicles, taken hundreds of thousands of inefficient trucks and SUVs off of the road, and led to broad public discussion of fuel economy. With 250 million vehicles on the road that, on average, get only 20.8 mpg, we have a long way to go to transforming the fleet, but Cash for Clunkers shows that when it comes to the benefits of efficient vehicles – reducing oil consumption, cutting global warming emissions and saving money at the pump – consumers get it.

Comments

[Alan]

Cash for clunkers was a success, but we can not afford to do it again, or on a larger scale.

Nevertheless, the program got one thing right, economical forces influence a consumer's behavior much more than the usual environmental education programs. Making alternative fuel vehicles cheaper (without tax credits) than conventional vehicles is the only solution that could save us from the climate crisis.