Cash For Clunkers Backfires, Makes New Cars More Expensive

Cash for clunkers is solidly in our rearview mirror, but it’s causing a fresh problem for drivers today. Edmunds.com’s CEO, Jeremy Anwyl tells Aaron Task that car prices are higher now because supply is low. As a matter of fact, Anwyl is telling people to not buy a car, if they can wait.

If that’s not enough of a reason to be irked with cash for clunkers, then how’s this study from UC-Davis, via Platts blog, that says the government paid 10 times as much as it should have to reduce emissions:

“While carbon credits are projected to sell in the U.S. for about $28 per ton (today’s price in Europe was $20), even the best-case calculation of the cost of the clunkers rebate is $237 per ton,” the university said, citing a report by UC Davis transportation economist Christopher Knittel.

“When burned, a gallon of gasoline creates roughly 20 pounds of carbon dioxide. I combined that known value with an average rebate of $4,200 and a range of assumptions about the fuel economy of the new vehicles purchased and how long the clunkers would have been on the road if not for the program,” Knittel said through the statement. “I even assumed drivers didn’t change their habits, although some analysts have suggested that the owners of new vehicles will drive more than they would have with their old cars.”

“In the end, the lowest cost to remove one ton of carbon from the environment was $237. More likely scenarios produced a cost of more than $500 per ton, even when we accounted for reductions in pollutants other than greenhouse gases,” he said. “That suggests the Cash for Clunkers program is an expensive way to reduce carbon.”

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.