Cash for Clunkers

By Nick Ludolph

For those who do not know, the “Cash for Clunkers” program was a Cash Allowance Rebate System used throughout the summer of 2009 where consumers who traded in their “clunker” received a voucher for $3500 to $4500 to be used towards a new car with better fuel economy. The idea behind the program was to stimulate the economy while replacing fuel-guzzling vehicles with more efficient vehicles thus theoretically reducing carbon emissions. I am writing to offer criticism of some of the economic and environmental implications of the program.

The “Cash for Clunkers” program was advertised as a great thing for the environment as well as the economy. Although the program had an exceptionally high turnout, its economic and environmental impacts were covered by a veil of misconceptions about the actual improvement it was making. Although the program successfully took almost 700,000 “clunkers” off the roads, there were external environmental impacts created by the production of the new vehicles that replaced the “clunkers” as well as the specific disposal requirements of the program.

Under the “Cash for Clunkers” program, “clunkers” that were disposed of had to be destroyed to ensure that they were not resold and put on the roads again. The disposal method used involved running the engines with sodium silicate replacing the motor oil, causing the engine to seize and become useless. Because the engines were destroyed, there were strong economic implications for scrap yard owners and workers who would normally sell the engine and other parts to offset the price of disposing of the old cars. In this sense, the “Cash for Clunkers” program was harmful economically causing some car recyclers to not participate in the program. This disposal method also created a large amount of waste because all of these disabled engines and parts next had to be disposed of somewhere instead of recycled. The emissions created by the production of new cars were also an issue. Participants in the “Cash for Clunkers” program were often unaware that the emissions for producing their new car would take on average five years to offset with driving their new car, depending on how much they drive and the fuel economy difference between the traded in car and the replacement.

I believe that we could have created this program to be more environmentally and economically helpful if we allowed the parts to be recycled and reused for other vehicles. This would require some regulation but many of the parts that were destroyed under the program do not affect fuel economy. Also, if we adopt a program similar to this in the future, I stress the importance of properly advertising the program so that people understand the full implications both economic and environmental.