Monday, August 3, 2009

Eco-nomics: Is Cash for Clunkers Bad for Transit?

The New York Times reports today on the Obama administration's claim that "Cash for Clunkers" is improving the average gas mileage of American's cars. I have no doubt that they are correct as statistically when the marginal gas mileage is above the average, the average has to go up (that for my students). But that this program might lower American's gas consumption is far from assured. For as American's trade in older more expensive cars to drive for newer cheaper cars to drive, they will undoubtedly drive more. Given that driving is relatively inelastic with respect to gas prices, it is likely that overall consumption would fall if this program were continued.

So this is good news for the atmosphere in the short-run, but in the long-run this will encourage more driving and less reliance on mass transit. It seems highly likely that this program will work against the administrations efforts to -promote transit and mass transit seems pretty key to a low energy future. Meaning that the atmosphere my suffer in the long-run. While good for consumers, this program is probably bad for transit.

Regardless, the program does seem to be having its intended first-order benefit: US automobile manufacturers are seeing huge increases in sales. But this massive transfer of American's tax dollars is benefitting all car companies, not just American companies or cars made in the US (to do so would create some sticky trade policy problems).

I have a better idea, how about a carbon tax where the proceeds go to fund research and development of newer more efficient automobiles, transit and renewable energy?


David said...

Trading in your car to buy a new car increases world wide oil consumption NOT reduce it. You may reduce your oil consumption, but not the worlds oil consumption due to the fact that another car is produced.

The greenest car you can get is the one you already own. Maintain it and keep it running as long as possible. When you get ready for a new car, buy the most fuel efficient used car you can find.

Cash for Clunkers is to stimulate the economy and will have a detrimental impact on the global environment. This is to get big business moving not save the environment. That being said. Buy a new car, I need a job.

E-Cigarette said...

I agree...the greenest car is the one you own. I just saw a report that 'clunkers' had to have <20mpg rating and the new car had to be at least a 4mpg increase. 24 miles to the gallon is still not good. I have a 1997 nissan sentra, still in great condition, at it get 31 mpg city and near 40 highway. If they were making cars like this back in 1997, why not now? oh...because the demand was and is still there for HUGE cars. What the heck are people putting in these huge cars. Usually a mom and 1 child. Do you need a bus for that?

danmcfarling said...

The best thing you can do for the local economy is PARK your car and use public transit. For each dollar spent on gasoline, 85 cents LEAVES the local economy (much of it goes overseas). But for every dollar placed in the public transit farebox, 80 cents goes directly to LOCAL FAMILY WAGE jobs. That strengthens the local economy, and helps create more jobs in your community. Encouraging people to buy new cars does NOT help the economy in the long run ... it makes it WORSE.

chris farrell said...

Good for you using a piece of chalk and rejecting the new tools.

Did you see this article on clunkers?

The best thing would have been a gas tax or carbon tax. Not only to lead toward more fuel-efficiency, but to encourage more investment in green technologies in this country, and area in which we are falling behind, and falling behind because there is no certainty that the price of gas will remain high. But anyway, if it was up to Obama, he'd do things right, but political realities are such that he can't get anything done. I'm starting to lose hope in this country.

Patrick Emerson said...

That is an excellent op-ed from the WaPo, thanks.

It lays out very well the essential aspects of the non-greenness of the CARS program. My post attempted to focus on another, the discouragement to utilize transit. But it is more about getting car sales up than being environmentally sound, IMHO. Many observers didn't think car sales needed help, BTW, that they were due for a strong rebound anyway.