Monday, August 17, 2009

UCD Analysis: "Cash for Clunkers" is a very expensive way to cut CO2

Of course, we oppose "Cash for Clunkers" because it fuels America's addiction to the automobile, but this analysis finds it is also bad economics:

The Implied Cost of Carbon Dioxide under the Cash for Clunkers Program
by Christopher R. Knittel, August 12, 2009

Abstract: The Cash for Clunker program aims to stimulate the economy, provide relief for automobile manufacturers and reduce greenhouse gas emissions. In this research note, I present estimates of the implied cost of carbon dioxide reductions under the Cash for Clunker program. The estimates suggest that the program is an expensive way to reduce greenhouse gases. This is true under a wide range of assumptions regarding the increase in fuel economy of new vehicles purchased under the program, how long the clunkers would have been on the road if not for the program, and whether we account for reductions in criteria pollutants. Conservative estimates of the implied carbon cost exceed $365 per ton; best case scenario parameter values suggest a cost of carbon of $237 per ton.

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