Economist Alan Blinder suggested last year a Cash for Clunkers program in which the government would pay a premium to buy inefficient clunkers and take them off the road and resell them as scrap. Targeted at cars and light trucks that are over 15 years old (there are 75 million of these in the US, about 30% of the vehicles in use), this would cost about $4 billion per million cars based on an average purchase price of $3500, according to Blinder. Since most clunkers are owned by low-income people, this would transfer some purchasing power to them which they are likely to use quickly. So the idea is that this would also be an effective economic stimulus while reducing pollution. But a big potential problem with this proposal is that the cash paid for the clunker may be too little to help purchase a replacement vehicle that is significantly greener.
Although automakers are being pressured to produce more fuel-efficient vehicles, and there is some funding in the stimulus package for battery development and tax incentives for plug-in hybrids, there hasn't been a systematic approach to greening the auto fleet. It is clear that we know how to make vehicles that are significantly more efficient, but the price tag for a new green vehicle ($20,000 and up) makes it a challenge to replace enough of the older vehicles to really reduce GHG emissions.
A workable plan needs to target not all clunkers, but only those that are driven more than X miles per year, and must provide enough of a subsidy to help purchase a replacement vehicle that delivers at least Y miles per gallon based on GHG reduction goals. Plus some way to discourage the higher fuel efficiency from being used up in additional driving, so that GHG reduction goals are actually achievable. I'll be coming back with a bit more analysis soon.
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