Life cycle environmental and economic impacts of "Cash for Clunkers"

Event Type: 
Seminar
Speaker: 
Shoshannah Lenski
Friday, April 8, 2011 - 12:30pm to 1:30pm
2024 Dana Building
Event Sponsor: 
School of Natural Resources and Environment

Committee: Greg Keoleian and Michael Moore

Abstract:
The US Consumer Assistance to Recycle and Save (CARS) Act of 2009, more commonly known as “Cash for Clunkers”, was intended to provide both environmental and economic benefits.  Through the $3 billion program, nearly 700,000 consumers scrapped fuel-inefficient vehicles in exchange for rebates of $3,500 or $4,500 toward the purchase of a new, more fuel-efficient vehicle.
 
Environmental benefits resulted from improved fuel economy of vehicles in the US fleet, and included reduction in both greenhouse gas and criteria pollutant emissions.  A life cycle accounting of the impact on emissions suggests that CARS had a one-time effect of preventing 4.4 million metric tons of CO2-equivalent greenhouse gas emissions, about 0.4% of US annual light-duty vehicle emissions.  This is substantially lower than estimates in previous studies, which failed to include the life cycle effect of additional emissions produced during new vehicle production and overestimated vehicle-miles remaining in the life of ‘clunkers’.  Using previously estimated pollution damage costs of $21 per metric ton of CO2, this benefit is worth $93 million.  About 20,000 metric tons of criteria pollutant emissions were also avoided.  Damage costs from criteria pollutant emissions vary significantly by geographic location and source height (ground level or stacks), which previous studies have failed to account for. Incorporating these factors suggests the benefits from avoided criteria pollutants were worth $17 million (two to six times greater than estimates using simple average or median damage costs).
 
In addition to the environmental benefits, CARS provided economic stimulus on both a macroeconomic level and for participating individuals through the rebate toward the purchase of a new vehicle.  The economic literature suggests the program induced sales of 350,000 to 450,000 new vehicles; created or saved up to 62,000 job-years; and contributed up to $4 billion in gross domestic product.  Comparing the market value of scrapped vehicles to the rebate provided through CARS, the consumer surplus or "gift" to participants is calculated to be up to $2 billion (or about $2,000 to $3,000 per vehicle).  The size of the consumer surplus is significantly larger than that offered in previous vehicle scrappage programs, and suggests there may have been opportunities to get more environmental and economic “bang for the buck” with lower rebates, an alternate mechanism for setting rebate values, and/or more specific targeting of vehicles for participation.

Bio: Shoshannah Lenski is completing her MS in Sustainable Systems in the School of Natural Resources and Environment (SNRE).  Her undergraduate degree is from Cornell University and prior to returning to graduate school, she worked for several years as a consultant for The Boston Consulting Group (BCG) in Chicago.  She has used her time at SNRE to learn about many technical, policy, and behavioral facets of sustainability, and has enjoyed working with the Center for Sustainable Systems on her thesis research on "Cash for Clunkers."

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