"Cash for Clunkers is a double economic stimulus that pays for itself quickly in oil savings while generating CO2 reductions for free"
Seth Borenstein, the AP science writer I admire greatly, has a long piece explaining that Cash for Clunkers is a very cost-ineffective way to save CO2. Duh*.
*BUT as a stimulus that saves oil while cutting CO2 for free — it has turned out to be a slam dunk, far better than I had expected. Indeed, Borenstein points out that “America will be using nearly 72 million fewer gallons of gasoline a year because of the program.” At $3 a gallon — hardly what the price is likely to average over the next decade — that is $216 million a year in gasoline savings.
So the billion dollar program pays the taxpayers back in oil savings in 5 years. That means the CO2 savings are for free!
So quoting a cost of more CO2 saved at more than $100 a ton misses the point, I think. The primary purpose of the program was NOT CO2 savings. It certainly wasn’t the primary reason the Center for American Progress put a (tougher) version of the idea forward back in November (see here). We saw it as an economic boost with efficiency and environmental gains (not just CO2 but urban air pollution).
And it isn’t how Obama described the program last week when he thanked the House for passing a $2 billion increase in funding:
The program has proven to be a successful part of our economic recovery and will help lessen our dangerous dependence on foreign oil, while reducing greenhouse gas emissions and improving the quality of the air we breathe.
The program has multiple benefits — and obviously we wouldn’t even be doing it were we not in a major economic downturn that has crushed the auto industry.
And it’s hard to argue the program’s stimulus benefits:
“The ‘cash-for-clunkers’ program for auto sales has been a dramatic success,” wrote Credit Suisse analysts on Friday. “This could drive auto sales and production sharply higher in the coming months,” wrote the analysts.
And there is a second stimulus from the program.
The majority of the $200+ million a year in gasoline savings would have left the country, since we import nearly 2/3 of our oil (and probably a higher fraction of marginal increases in oil use). Now that money stays in the pockets of consumers, who will save some of it and spend the rest of it, circulating most of the money in this country rather than overseas.
As a CO2-saver only, sure, Cash for Clunkers wouldn’t be a wise investment.
And I understand the media’s need to criticize everything, even the most successful-seeming government program. My father — a newspaper editor for 30 years — had a wall hanging (crocheted by my mother) over his desk that said, “Nothing can stand the light of day.”
Still, some ideas turn out better than anyone expected and deserve praise. This program stimulates the economy in two ways and helps a key industry in trouble while delivering multiple energy and environmental benefits that save the taxpayers more than the program cost. What more can you ask?