Amid the supplemental appropriations bill (warning, 144 page pdf), currently awaiting vote after a Conference Committee, is the Consumer Assistance to Recycle and Save (CARS) Program (pages 52-58). Naming bills in deceptive and often cutesy terms has truly become an art form. The CARS Program merits being in the same zone as the ever-so appealing sounding No Child Left Behind or Healthy Forests, an ever-so appealing name that doesn’t stand up to any serious scrutiny. To put it simply, rather than the CARS Program, this might be more appropriate called the C.R.A.P.P.: Consciously Rewarding Augmenting Pollution Program.
CARS is a program to provide incentives to drivers of old, fuel-inefficient vehicles to buy new, slightly less inefficient vehicles. Often called “cash for clunkers”, the developed legislation is structured in a way that makes it inequitable, inefficient, wasteful (on multiple levels) and (being very generous) very marginally productive re long-term interests to reduce our oil dependency and cut greenhouse gas emissions. The C.R.A.P. Program is a sad comment on special interest influence on Congress along with the inability of logical analysis to influence a program toward something more intelligent.
For background on the legislation (the Conference Committee seems to have adopted the weaker House version rather than the better, although still problemmatic, Senate version), see A Clunker of a Deal?
In short, the bill is promised to target selling 1 million more vehicles before the end of the year and support these three policy priorities:
- Reduce dependence on foreign oil,
- Reduce air pollution, and
- Reduce greenhouse gas emissions.
The bill does this via “cash for clunkers”, vouchers to owners of old vehicles to encourage them to go shopping for a new vehicle and scrap the old one. As an example, when it comes to light passenger vehicles, owners (at least one year registered) of a car rated at less than 18 miles per gallon can receive a $3500 voucher (tax free) for a new car if it gets at least 22 miles per gallon and $4500 if it gets at least 28 mpg.
Why is this a bad bill, on both basic policy and basic analytical reasons?
- The fuel saving requirements are absurdly low.
- The actual oil demand reduction per tax dollar invested is absurdly low.
- The bill, as structured, is overly restrictive in a counter-productive way.
- There is a basic question as to equity.
- This is structured poorly, using “mpg” which provides less visibility on impact than the better “gpm” (gallons per mile).
Absurdly low fuel savings requirements
One way to judge fuel savings links back to the question of reducing greenhouse gas emissions. In short, how fast will the fuel savings save enough CO2 and other emissions to make up for the new car’s “embedded CO2″ (the pollution it takes to manufacture, sell, and deliver the new vehicle)?
When you scrap an old car for a new one, you actually start out having emitted more CO2 than you would have if you had just stayed with your clunker — about a year and a half’s worth. If your new car is more fuel-efficient than the old one, those excess emissions shrink with each mile you drive. Eventually, you reach a break-even point when your new car’s embedded emissions are offset by those emissions you avoided by driving that new car. The time for that to occur is called the payback time. It’s not until the payback time is over that the cash-for-clunkers swap begins to accrue real greenhouse gas emissions savings.
A rough rule of thumb might be: two years or less for an automobile. Sadly, this bill’s parameters mean that this can actually be over 10 years with the parameters of a $3500 voucher.
And, as well, the bill rewards people for making quite marginal increases in fuel efficiency — not creating significant incentives from moving from a gas hog to a truly fuel efficient vehicle.
Reduced oil demand per tax-dollar invested is absurdly low
A reasonable standard to discuss is how much will it cost per reduced barrel of oil. This is rather hard to calculate with precision, due to many uncertainties in how the program will actually work out in the real world. But, let us assume that the average, across 1 million vehicles, will be 200 gallons of reduced fuel use per year. (This is potentially a high end estimate of likely savings.) This translates to 200 million gallons of reduced gasoline demand per annum or a little less than 5 million barrels of cut oil demand. Sound impressive? In fact, this is less than 1/4th of a day’s gasoline demand. Across the year, this translates to about 13,000 barrels of reduced demand per day, or less than 1/10th of 1 percent of US oil use. And, the cost: $1 billion. This translates to just about $80,000 of US taxpayer money per barrel of reduced daily demand. This places it well above (more expensive than) many other viable options for reducing oil dependency.
An overly restrictive bill? And basic equity?
If you have an old car, a true clunker, rated at 19 miles per gallon, don’t bother getting in line. This suggests both a poor structuring element of the bill and a question of equity. This is an equity issue. Those who bought horribly fuel-inefficient vehicles, in the past, will now receive incentives for buying somewhat less fuel inefficient vehicles. Those who bought more reasonably, even if only slightly, have no such support.
This bill should have been focused on relative fuel efficiency improvements, rather than setting a standard as to the fuel efficiency of the older vehicle. Why not, as part of this, offer a ‘cash for clunkers’ for vehicles above a certain age (let’s say Germany’s nine years) where the new car is at least some X% more fuel efficient than the old vehicle’s performance? (How about $3500 for at least 30% fuel efficiency improvement and $4500 for at least 50% fuel efficiency improvements? With a top limit for a trade-in?)
Analytically unsound policy
The very underpinning of the bill is broken. Providing vouchers based on “miles per gallon” provides a distortion that confuses as to the actual impact on reducing annual fuel consumption.
“MPG” is far less valuable for an approach for a “FeeBate” or gas guzzler turn in then using a “GPM” or gallons per mile. (Difference between 10 and 20 MPG and 20 MPG and 30 MPG same in MPG but not in GPM. 1st is move from .1 to .05 GPM while second is move from .05 to .033 GPM.) GPM is a much faster tool for understanding actual fuel use (and, therefore, CO2 emissions) impacts of differing automotive performace. GPM is a MUCH better measure if we are worrying about incentivizing, somehow, lower fuel use. And, using GPM (actually, better, is GP100M: gallons per 100 miles), the standard for vouchers could be quite simple: base this on gallons saved per 100 miles driving.
An 18 mpg car is 5.55 gallons per 100 miles. Moving to a 25 mpg vehicle is a move to a 4 g100m, a savings of 1.5 g100m which might be an appropriate minimum savings for the program to achieve a less than five year payback for the embedded energy.
And, if using gp100m, there would be no need for limiting trade-in vehicle fuel efficiency. The question: achieving the appropriate gasoline savings on a gp100m basis. Thus, for the owner of a 25 mpg vehicle to achieve the same gp100m fuel savings as that 18 mpg to 25 mpg move, the new car would have to get 40 or more miles per gallong. This would be a move from 4 gp100m to 2.5 gp100m
If we really want to get cars off lots, lets make them reasonably fuel efficient ones based on a sensible measurement method. And, make this something open to all old “clunker” owners who are able to achieve the appropriate fuel savings.
In short … The CARS Program is a load of C.R.A.P.
This will help clear dealer lots, but it won’t do squat for our real problems:
- It will not significantly reduce our fuel consumption; we will still be burning far too much to accomplish too little.
- It will not fix the bad production mix of the auto companies; it adds demand for guzzlers only slightly less thirsty than the ones they’d replace. But worst of all,
- It will leave us with a brand-new fleet of guzzlers which will not be paid off for years at the exact time when we are facing radical increases in the cost of oil.
It’s almost as if this bill was intended to screw the country.