University of Wisconsin-Eau Claire
Cash For Clunkers:
What is it & What Happened?
Drew Christensen
Jared Farmer
Laurelyn Wieseman
Eric Jamelske
Department of Economics
University of Wisconsin-Eau Claire
Chippewa Valley Center for
Economic Research & Development
University of Wisconsin-Eau Claire
Overview
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Program Goals
Program Guidelines
Cost of Reducing Carbon Emissions
National Auto Data
WI and Local Auto Data
Conclusion
Questions and Discussion
University of Wisconsin-Eau Claire
Program Goals
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Get greener cars on the road
– reduce carbon emissions.
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Boost the auto industry, and by extension,
the U.S. economy.
Source: http://www.dot.gov/affairs/2009/dot13309.htm
University of Wisconsin-Eau Claire
Economics = Incentives
University of Wisconsin-Eau Claire
Program Guidelines
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Clunker must be less than 25 years old.
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Only purchase or 5 year minimum lease of new vehicles.
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Clunker must have an average fuel rating of 18 or fewer MPG.
– some pick-ups and vans have different requirements.
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Clunkers must be registered and insured continuously for the full
year preceding trade-in.
University of Wisconsin-Eau Claire
Program Guidelines
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Clunkers must be in drivable condition.
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The program requires the scrapping of clunkers.
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The new car must have a suggested retail price of no more than
$45,000, and for passenger automobiles, the new vehicle must
have an average fuel rating of at least 22 mpg.
Source: http://www.cars.gov/faq#category-10
University of Wisconsin-Eau Claire
Cost of Carbon Reduction
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Estimated cost of carbon = $237 to $365 per ton ($300).
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Inefficient to pay more than this for carbon reduction.
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Average MPG of clunkers= 15.8
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Average MPG of new cars = 25.0
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Average MPG increase = 9.2
Sources: http://www.cars.gov/faq#category-10
University of Wisconsin-Eau Claire
Cost of Carbon Reduction
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Estimated average miles driven per year = 12,000
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Net reduction in gasoline use = 280 gallons per car
– 12,000 x 9.2
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One gallon of gasoline burned = 20 pounds of carbon emissions.
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Net reduction of 2.8 tons of carbon per car, per year.
– 20 x 280 = 5,600 lbs
University of Wisconsin-Eau Claire
Cost of Carbon Reduction
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Estimated 3-4 years (get new car earlier)
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Between 8.4 and 11.2 tons of carbon eliminated
– 3 x 2.8
or
4 x 2.8
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Recall the estimated cost of carbon = $237 to $365 per ton ($300)
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Estimated value of carbon reduction = $300 x 8.4 = $2,520 per vehicle
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Estimated value of carbon reduction = $300 x 11.2 = $3,360 per vehicle
University of Wisconsin-Eau Claire
Cost of Carbon Reduction
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Average clunker payout = $4,200
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Estimated value of carbon reduction = $300 x 8.4 = $2,520 per vehicle
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Estimated value of carbon reduction = $300 x 11.2 = $3,360 per vehicle
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$4,200 > $2,520 ($1,680)
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700,000 vehicles replaced
Estimated loss of between $588 Million and $1.2 Billion
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or
$4,200 > $3,360 ($840)
University of Wisconsin-Eau Claire
Cost of Carbon Reduction
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Expensive/inefficient method of reducing carbon emissions
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Drive old car longer (economy)
Drive new car more (better mileage)
More efficient new cars of the future
Under-valuing the environment
Value of jobs and increased auto sales
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Additional cost of recycling clunkers (time and money)
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However, carbon reduction was not the only program goal
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Stimulate economy/boost US auto industry
University of Wisconsin-Eau Claire
Local Auto Dealers
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Clunkers were really Clunkers
– Good that they are off the road
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New cars were mostly compact/sub-compact/mid-size
– Few trucks and small suvs
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Could have sold many more cars if we had them
– Limited inventory
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Had to wait for money from the government
– Pay customer and pay auto company, then wait for reimbursement
University of Wisconsin-Eau Claire
Eau Claire Ford
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74 Clunkers traded in
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Focus (40 mpg), Fusion (30 mpg), Escape/Mariner (23 mpg)
University of Wisconsin-Eau Claire
Markquart Toyota - Chevrolet
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150 Clunkers traded in
– 80 Toyota and 70 Chevy
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Yaris (40 mpg), Corolla (30 mpg), Camry (25 mpg)
Rav 4 (25 mpg)
Prius (50 mpg)
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Cobalt (35 mpg), Malibu (30 mpg), Impala (25 mpg)
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University of Wisconsin-Eau Claire
Ken Vance Automotive
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220 Clunkers traded in
– 100 Honda, 60 Hyundai, 40 Volkswagen, 20 Pontiac
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Civic (33 mpg), Accord (30 mpg)
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Sonata (33 mpg), Elantra (33 mpg), Accent (33 mpg)
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Vibe (33 mpg), G-6 (30 mpg)
University of Wisconsin-Eau Claire
Conclusions
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Cost benefit analysis of carbon reduction
– Expensive, many assumptions
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Boost to auto sales
– Nationally by automaker
– In WI and EC
– Generally short lived boost
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Local dealers liked the program
University of Wisconsin-Eau Claire
Questions?