Big news today is that the government has run through the $1 billion allocated to the "Cash for Clunkers" program. An environmentally savvy friend emailed to suggest I run the numbers on just how pricey the program's carbon savings are. So here's one example: a driver trades in his 1999 Pontiac Trans Am, which gets an estimated 18 miles a gallon, for a 2009 Toyota Corolla, which gets an estimated 30 miles a gallon. The government pays $4,500 toward the Corolla under the terms of the "cash for clunkers" program. Driving the average of 12,000 miles a year, the Pontiac burned 10,671 pounds of carbon a year, while the Corolla burns just 8,385 pounds. So the $4,500 saves 2,286 pounds of carbon a year, or, to round up, 23 tons of carbon over the ten year life of the vehicle. (We're assuming that the customer wouldn't have traded in the Trans Am at some point in the next ten years even without a subsidy, which is probably a flawed assumption that in any case only strengthens the case against the government subsidy.) It works out to about $196 per ton of carbon prevented.
What, you might wonder, is the free-market price for offsetting a ton of carbon? About $12 at terrapass, $14 at Native Energy. "Cash for Clunkers" is an awfully expensive way to fight greenhouse gas emissions. The Wall Street Journal quotes the chief executive of AutoNation, Michael Jackson, as saying, "There's a very compelling case the government should put more money into it. It's a great stimulus to the economy." It may be a subsidy to auto dealers, auto makers, and new car buyers, but it also hurts gas companies, who sell less gas. And it hurts more frugal Americans, or those who take public transportation, who have the money that they have earned taken from them in taxes and distributed to those who are choosing to spend money on new cars. It amounts to a government giveaway. No wonder there was such high demand for the program. If policymakers want to transfer wealth to auto dealers, automakers, and new-auto buyers at the expense of everyone else, including used-car buyers, subway riders, and those driving old but fuel efficient cars, that's one thing. But if the goal is reducing carbon dioxide emissions, there are much less expensive ways to do it.