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Cash for Clunkers becomes Handouts for Hummers

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"Cash for Clunkers becomes Handouts for Hummers"

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As a means of reducing greenhouse gas emissions, the “cash for clunkers” deal Congress appears to be on the verge of embracing is probably among the least cost-effective uses of federal dollars one could imagine (see here).  That doesn’t mean it won’t have benefits to the auto industry, but nobody should sell it as a GHG reducer. Today’s “guest bloggers” are Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME), whose piece, “Handouts for Hummers,” was first published in today’s Wall Street Journal.

http://www.rogerwendell.com/images/fueleconomy/no_hummers.gifIt’s amazing how quickly a good idea can go bad in Washington. In January, we joined with Sen. Charles Schumer to introduce a bill that would allow Americans to trade in gas-guzzling cars in exchange for vouchers worth up to $4,500 toward the purchase of vehicles with greatly improved fuel economy. This legislation was modeled after programs in California and Texas that improved fuel efficiency, reduced pollution, and stimulated auto sales.

Our “Cash for Clunkers” proposal was a win-win for the environment and the economy. Then Detroit auto industry lobbyists got involved. Soon a rival bill emerged in the House, tailored perfectly to the auto industry’s specifications.

The House bill was written so quickly that one of its main components — a provision that would have excluded any vehicle manufactured overseas — had to be removed because it violated trade laws. But the worst item on the auto industry’s wish list is still at the heart of the bill — a provision that undermines fuel-efficiency standards.

On Tuesday, the House approved this legislation, which would subsidize the purchase of a new Hummer H3T (16 mpg) or a new Dodge Ram 1500 4×4 truck (15 mpg), but not a two-year-old Ford Focus (27 mpg) or used Chevy Colorado (20 mpg). A companion bill is pending in the Senate.

On Monday, we introduced a new version of our bill, which keeps reasonable fuel-efficiency standards in place. It would result in at least 32% more oil savings than the auto-industry bill and significantly reduce greenhouse gas emissions. Each participating driver would save up to 176 gallons of gas a year, according to the American Council for an Energy Efficient Economy. In addition, our bill would permit the purchase of used vehicles, helping lower-income Americans to participate.

Last summer, $4-a-gallon gas prices forced many Americans to park their guzzlers. Today, average gas prices are creeping back up toward $3 a gallon. Drivers in a tough economy need more incentives for fuel efficiency, not subsidies for inefficient vehicles that will cost more in the long run.

The bill being pushed by the auto industry is simply bad policy. Encouraging the purchase of inefficient vehicles undercuts the Ten-in-Ten Fuel Economy Act of 2007, which mandates at least a 10 mile-per-gallon increase in Corporate Average Fuel Economy standards over the next 10 years. And yet less than two years after passing this landmark bill we are weighing legislation that would create handouts for Hummers.

The truth is, the House bill and its Senate counterpart are another big bailout. These bills are expertly designed to provide Detroit one last windfall in selling off gas guzzlers currently sitting on dealer lots because they’re not a smart buy.

Supporters of the auto industry approach say that our bill’s higher fuel-efficiency requirements give foreign automakers an advantage. But there are plenty of fuel-efficient vehicles made by American companies that would qualify, including the Ford Escape, the Dodge Caravan, the Jeep Compass, the GMC Yukon Hybrid, the Chevrolet Cobalt, the Chrysler Sebring, the Saturn Aura Hybrid, the Pontiac Vibe, and many other models.

Trucks with above-average fuel economy for their class would also qualify. They include the Chevy Silverado, the two-wheel-drive Ford F-150, and the Toyota Tacoma (built in California). Drivers could also choose from an array of Toyotas and Hondas built by American workers in U.S. factories — such as the Toyota Camry (built in Kentucky) and the Honda Accord (built in Ohio).

The bottom line is that fuel-efficient vehicles should be the main focus of any “Cash for Clunkers” bill. So Americans need to make their voices heard, before Congress spends billions of dollars to put more gas guzzlers on the road at the behest of the auto industry. Our approach is good for both the economy and the environment.

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17 Responses to Cash for Clunkers becomes Handouts for Hummers

  1. ecostew says:

    Under average 10-year driving scenario for a new car some 20% of the GHG emissions occur during manufacturing phase. This is not an AGW mitigation bill.

  2. Rick Covert says:

    Gasoline is at $2.33 here in Houston and that’s the competitive price. Let’s just see how that handouts for Hummers program works as gas prices continue the inexorable rise.

  3. Rick Covert says:

    Say, shouldn’t there be a ban against lobbying by companies receiving government bailouts. ;)

  4. MikeN says:

    So what if it cash for Hummers? You are still increasing fuel mileage, and isn’t that the goal? People can still keep doing this every few years. By putting such a wide range of cars out there, you are reducing the number of low fuel mileage cars immediately. If you make it only for high mileage crappy cars, people won’t be as interested. The effect of the bill as is, will reduce greenhouse gas emissions by many million tons.

  5. Peter Bellin says:

    I found it interesting that one example of a fuel-efficient vehicle is the Dodge Caravan. I have one that I barely drive because I feel it is inefficient.

    In any case, I agree with the tone of the letter. If we wish to (collectively) encourage retirement of inefficient vehicles, then it makes sense to have a minimum fuel efficiency for any vehicle provided an incentive – I think 25 mpg is reasonable, perhaps as low as 20 mpg for a larger SUV or truck.

  6. Nick Richards says:

    Amazing that the enlightened senator failed to point to the 15 mpg Land Cruiser, 16 mpg Tacoma and 17 mpg FJ Cruiser also built by Toyota would qualify. Biased much?

  7. MikeN says:

    If we wish to (collectively) encourage retirement of inefficient vehicles, then it makes sense to allow anything that gets an inefficient vehicle off the road, replaced by a more efficient vehicle.

  8. I remember reading a few years ago a surprising study by the UCS showing that you actually save more CO2 by trading a 10 mpg for a 15 mpg vehicle than the more eco aware 30 mpg for a 35 mpg vehicle.

    I think they may have based this legislation on that study.

  9. anyoneoutthere says:

    I have been reading about the pro s and cons of this proposal for months and have come to the conclusion that the owners of the real guzzlers could not take advantage of this program because they would trade in vehicles worth more than they would get. show me a hummer that you can buy for forty-five hundred dollars, even as scrape its worth more than that.This program is a middle class incentive to use that third car sitting on their driveway and getting a hell of a deal for it. the people it should have been for,the ones who should have been helped have been left out.The ones who drive clunkers because of circumstances are losing twice, they can not afford to take advantage of this and they will be paying more for the clunkers that are left. WAY TO GO GUYS!!!!

  10. Hal says:

    Cash for clunkers is really just a bad idea in general. Over time people will buy more fuel efficient cars when the cost of gasoline goes higher. And it will go higher.

  11. David says:

    “you actually save more CO2 by trading a 10 mpg for a 15 mpg vehicle than the more eco aware 30 mpg for a 35 mpg vehicle”

    That’s definitely possible. Say you have two drivers, each averaging 30,000 miles per year. Driver 1′s vehicle gets 10 mpg. Driver 2′s vehicle gets 30 mpg. You have a choice. You can use your money to encourage driver 1 to buy a new vehicle that gets 15 mpg, or you can encourage driver 2 to buy a new vehicle that gets 35 mpg. In the first scenario, you would reduce total fuel consumption from 4000 gallons a year to 3000 gallons. In the second scenario, you would reduce total fuel consumption from 4000 gallons a year to 3857 gallons a year.

  12. MikeN says:

    Pretty obvious. 10 to 15% is a 50% increase and 30 to 35 is a 17% increase.

  13. Seth Masia says:

    These bills contain the same kind of moral hazard as the carbon-permit giveaways: They reward past bad behavior. The folks who get the cash credit are the folks who bought, owned and drove gas guzzlers for year. No cash credit for those of us who’ve been driving efficient vehicles all our lives.

  14. Rick Covert says:

    All we’ll see is more later models then we would ordinarily see in ditches, ravines, rivers, at the bottom of steap cliffs when gasoline prices make driving these monsters more unbearable.

  15. karen says:

    60% the cars that are currently donated to charity will now be eligible for a $3500 or $4500 voucher under the cash for clunkers program. Since the tax deduction for donating a car is only $500 or what the car sells charities won’t be able to compete with the program and charitable car donation will end. A better idea is to just change the amount a person can deduct for donating their car back to the book value. That way every car is eligible, the government doesn’t have to spend $4 million of our dollars giving away vouchers and trying to administer a program that is way too convoluted!

  16. Marcus says:

    “Pretty obvious. 10 to 15% is a 50% increase and 30 to 35 is a 17% increase.”

    Actually, it is even more than that. Going from 10 mpg to 20 mpg saves you more than going from 30 mpg to 60 mpg. The key is to convert to “gallons per mile”. Or 0.1 to 0.05 (saving 0.05 gallons per mile) compared to 1/30 to 1/60 (saving .016 gallons per mile).

    Indeed, going from 10 mpg to 20 mpg is the same as going from 20 mpg to a zero-emission car. (Assuming the same number of miles driven).

  17. DC says:

    Seth, you’re right. And those of us with low-MPG vehicles that are a few MPG over the weirdly low 18MPG barrier might be SOL. And we have no vanity or any local mountain range to constantly drive over either.

    It also takes two to tango: It’s like other people who say “We tried affordable housing”, but as wages stagnate or decline (which certainly does NOT help the economy), credit is the only thing left. Maybe not entirely relevant to this discussion, but I can no longer blame the consumer for having high debt levels. The cost of education, health insurance, you name it — it’s not been keeping up with wages for decades. (the dollar had much more buying – and saving – power in 1986 compared to now…)