The Car Allowance Rebate System (CARS for short, or 'cash for clunkers' as it is more commonly known) was the US's answer to the scrappage schemes in Germany and the UK which appeared to have revitalised their respective automotive sectors. With payments of up to $4,500 for motorists willing to swap their ageing gas guzzling vehicles for more fuel efficient ones, it seemed like a 'can't lose' scheme with consumers getting cheaper cars, the automotive industry enjoying more sales and the environment boosted by a reduction in harmful emissions.
And so it proved as the subsidy programme helped Ford to its first increase in US vehicles sales since 2007 after it sold 158,838 vehicles in July – a two per cent increase compared to the previous year (see article). With General Motors and Chrysler also showing signs of modest improvement, all looked rosy.
At least that was until analysts started to delve a little deeper.
A money saving scheme that's proving costly
Though the scheme proved so popular that the initial $1billion set aside for it ran out last month, auto sales only rose by 2.4 per cent in July suggesting that American consumers are still nervous about their jobs and the economy. Of course any upward momentum is to be welcomed and Congress has now approved a further $2billion as an emergency top-up for the programme (see article).
However, its overall merits are open for debate after a study by UC Davis transportation economist Christopher Knittel questioned the implied costs of reducing greenhouse gas emissions.
His analysis found that the programme is paying nearly 10 times the projected price of carbon credits per ton in the best-case scenario. While carbon credits are projected to sell in the US for $28 a ton, the cost of the clunkers rebate is $237 a ton according to Knittel's 'best-case' estimate, with more conservative estimates producing costs in the region of $365 a ton.
According to Knittel the results suggest that the programme is an expensive way to reduce carbon, although he does state that it is possible the stimulus benefits outweigh added environmental costs.
So is this scheme green at all?
Clearly the goal of the cash for clunkers scheme was to revitalise US auto sales – but the underlying target, according to the Obama administration, was also to encourage US drivers towards more fuel efficient vehicles that would ultimately reduce the country's dependence on foreign oil.
Well, it seems that Americans, while not necessarily 'over' their love of large, gas guzzling cars, are at least taking steps in the right direction. According to statistics from the Department of Transport, US motorists are fleeing their beloved SUVs and pick-up trucks as they make up 83 per cent of the top trade-ins.
Indeed six of the top 10 trade-ins are SUVs with two mini-vans and two pick-up trucks rounding out the list.
So it seems that the programme is helping to get America's dirtiest cars off the road, but that still hasn't convinced some environmentalists. An analysis by the Worlds Resources Institute has found that the scheme will save less than two days' worth of carbon emissions between now and 2019 with replacement vehicles only having to achieve a four mpg improvement compared to the clunker it replaces.
Our verdict – green shoots should not be ignored
When the cash for clunkers scheme was introduced, we at TheGreenCarWebsite.co.uk were disappointed that it didn't go further in encouraging motorists to make greener choices. It is our belief that the bar could have been set higher and that the rewards for replacing an old vehicle with a truly green car would have been more fitting than simply replacing it with a vehicle that offers marginally better fuel economy.
Nevertheless, that doesn't mean that the success of the scheme should be ignored in that it has offered an incentive to buyers at a time when rocketing petrol prices are still very much on their mind. This is encouraging them to make greener choices and general purchasing patterns are starting to change with all but two of the cars on the top 10 purchase list now saloon (sedan) vehicles and the fourth most popular being the 'ultimate green car' the Toyota Prius.
Perhaps what we must remember when evaluating the scheme is that its goals are short-term – a welcome boost for the auto industry and greener buying habits for the US public.
As long as the Obama administration doesn't lose sight of its long term goals – and its plans to force automakers to produce cars that average 27mpg, five higher than required by the cash for clunkers programme, suggest that it won't – then its success should still be welcomed.
Faye Sunderland
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