The Shaky Economics Of 'Cash For Clunkers'

http://www.npr.org/templates/story/story.php?storyId=111617646

by David Kestenbaum, August 6, 2009

Congress seems poised to extend the wildly popular "cash for clunkers" program, tripling the size of its initial $1 billion budget. But ask some economists about the program, and they shake their heads.

Allen Sanderson, an economist at the University of Chicago, says it's important to remember what's behind many auto dealers' crowded showrooms. Out back, he says, you'll likely find a parking lot filled with the cars that have been traded in. Many of those vehicles run fine. And they all are scheduled for execution.

The government trade-in program requires that the engines of the clunkers be killed. More accustomed to fixing cars, mechanics will pour in a solvent called "liquid glass," then run the engine until it seizes.

From an economic perspective, that's a waste, says Sanderson, who calls the program "silly." The autos required labor and resources to build. Consider a similar program to replace old light bulbs with more efficient ones, he says. Would you smash the old bulbs?

Sanderson admits that there is some environmental benefit to the clunkers program. "The question is at what cost," he says. "For $3 billion, could we do something better for the environment than what we're doing? I think absolutely. It's a very inefficient expenditure."

Stimulus Or Hype?

What about the argument that "cash for clunkers" provides a boost for the auto industry? Rep. Edward Markey (D-MA) recently called the program "electroshock therapy for the economy." Rep. John Campbell (R-CA) declared, "Plants will open up, they will be producing more cars, and people will go back to work."

Jeremy Anwyl, the CEO of the car research site Edmunds.com, isn't so sure. Anwyl says that even without the program, people trade in about 60,000 clunkers a month. While "cash for clunkers" has encouraged more people to trade in their vehicles, Anwyl argues that most of them would have come in sooner or later anyway.

"It encouraged anyone that had a clunker that would have traded in their vehicle over a three- or four-month period to do so over three or four days," he says. "So, at the end of this you have to wonder how many additional sales were actually created."

Anwyl says he feels bad about criticizing the program. "Hey, I'm as happy as anybody to see car sales go up," he says. After looking at the data, he calls it "one of the more over-hyped programs in an era of over-hyping programs." (진작시키는 프로그램들이 많은 가운데 이미 진작된 프로그램?)

The German Experience

The U.S. is not the only country trying out the "cash for clunkers" idea. Germany has a much larger program, at $7 billion.

Stefan Schneider, chief international economist at Deutsche Bank Research in Germany, supports his country's effort. He argues that encouraging people to trade in cars now instead of later makes sense, because the economy needs a boost to get it going again. Schneider sees evidence that the $7 billion the government is spending on incentives has boosted spending.

"In the first quarter, private consumption picked up a bit," he says. "If you look at other indicators, retail sales, it's pretty evident that's mainly coming from the car program."

Schneider says there is concern that when the program ends, the bump in car sales will turn into a dip of about the same size. But the hope is that the economy will have recovered a bit, and the fall won't be so painful.

In the grand scheme of the global economy, the American and German programs combined don't count for much. James Galbraith, an economist at the University of Texas, says he's surprised the American "cash for clunkers" initiative has generated so much controversy. It's hard to devise a perfect program he says, and this one is merely "inoffensively inefficient."

E.P.A. Allows CA Emissions Rules

E.P.A. Allows California Emissions Rules
June 30, 2009, By Kate Galbraith
http://greeninc.blogs.nytimes.com/2009/06/30/epa-allows-california-emissions-rules/



The Environmental Protection Agency has granted California’s long-sought request to tighten tailpipe emission regulations, a key step in the Obama administration’s plan to make cars across the nation more fuel-efficient.

Tuesday’s announcement did not come as a surprise, since the president announced last month that he would craft tough new rules for automobile emissions, and would do so by adopting the strict standards that California has wanted.

Since 2005, California has been seeking a waiver from the E.P.A. to impose stricter tailpipe emissions standards than those in effect nationally. The Bush administration denied the waiver request in December 2007.



December 21, 2007, Denial of State Emissions Plan Was Foreshadowed
By JOHN M. BRODER and MICHELINE MAYNARD
http://www.nytimes.com/2007/12/21/washington/21emissions.html

Stephen L. Johnson, the environmental administrator, announced the decision on Wednesday, the day President Bush signed the first major change in vehicle mileage standards passed by Congress in 32 years.

Mr. Johnson said the new law made the proposed California standards unnecessary.

California developed rules in 2004 to reduce tailpipe emissions of carbon dioxide and other pollutants that scientists say contribute to global warming. The state applied to Washington in December 2005 for a waiver from the Clean Air Act to let it apply the tougher standards. Eventually, 16 states joined the application for the exception.

Since 1970, such waivers have been routinely granted more than 50 times involving tailpipe pollutants that foul the air in some states more than in others. But none faced the political atmosphere surrounding the California proposal, which dealt with a gas that affects the world climate, not that of a particular state.



Thirteen other states and the District of Columbia have also announced plans to adopt the California standards; the Clean Air Act gives them a choice between following the standards of California or those of the rest of the nation.

An auto industry group declared itself satisfied with the process, which will end up ensuring that the nation as a whole has a single emissions standard starting in 2012, when the national standard takes effect. Automakers had been concerned about the possibility of making cars to meet two different standards.

There will be a slight lag, however, between California’s implementation of its program and the national program, Mr. Hwang, , the transportation policy director for the Natural Resources Defense Council, said. California’s standards start with the 2009 model year (essentially moot because it is almost over) — three years earlier than the national standard.

By 2016, Mr. Hwang said, the national fuel economy standard will be about 35.5 miles a gallon on average under the new rules — a level that will be reached essentially four years faster than Congress had mandated, he said.

Int'l climate talks in L'Aquila, Italy, 2009

Climate Talks End With Meager Promises by Richard Harris
http://www.npr.org/templates/story/story.php?storyId=106425707

Obama Joins Global Warming Deal by Richard Harris
http://www.npr.org/templates/story/story.php?storyId=106397667


Morning Edition, July 10, 2009 · International climate talks held in Italy this week ended with little progress. The rich industrial nations wouldn't promise to cut back their emissions in the near term. And China, India and the rest of the developing world wouldn't commit to cutting their emissions, ever.

All nations of the world need to act to reduce the risk of a climate catastrophe. But so far, there's much more posturing than action.

China argues that the United States and other rich nations put most of the carbon dioxide into the atmosphere, so they need to act first and most aggressively. They demand that those nations slash their carbon dioxide emissions by a staggering 40 percent — in just 10 years.

Eileen Claussen, president of the Pew Center on Global Climate Change, who was once a diplomat, regards this demand as little more than an over-the-top bargaining tactic.

China is still struggling to pull hundreds of millions of people out of poverty. There is no way at this point they can credibly commit to actually bring down their total carbon emissions.

The industrialized world, on the other hand, has acknowledged that the world needs to take dramatic action and has set ambitious long-range goals. But they haven't agreed to near-term action plans.

And action from the developed world doesn't mean just cutting their own emissions. Just as important, rich countries need to spread clean energy technology — and money — around the world.

The Obama adminsitration is starting to work with China directly to help push forward clean technologies. But that makes some in Congress nervous — after all, we're helping a major economic competitor.

A climate that can't tolerate much more carbon dioxide before the world gets dangerously hot, rich countries offering more rhetoric than action, and developing nations that say raising living standards is more important than cutting back on fossil fuels.

All Things Considered, July 8, 2009

Targeting global warming, President Barack Obama and other leaders of the world's richest industrial countries pledged Wednesday to seek dramatic cuts in greenhouse gas emissions by 2050 to slow dangerous climate change. Setting a marker for success, they agreed for the first time that worldwide temperatures must not rise more than a few degrees.

However, their goals are nonbinding, and it's far from clear they will be met. The wealthy nations failed to persuade the leaders of big developing countries to promise to cut their own fast-spreading pollution, unable to overcome arguments that the well-established industrial giants aren't doing enough in the short term.

Obama and his counterparts from the other wealthy Group of Eight nations agreed that global temperatures should be kept from rising by more than 2 degrees Celsius, or 3.6 degrees Fahrenheit, in the fight against weather changes caused by humans.

Environmentalists welcomed the shift in U.S. policy but criticized the G-8's failure to agree on more immediate goals for the industrial countries. The long-term ambition "is too far off to matter — poor people are being hit today," said Antonio Hill, of the nonprofit Oxfam International.

The G-8 leaders also addressed the global recession and agreed economic conditions are still too shaky to begin rolling back massive fiscal stimulus plans.

The abrupt return home from Italy of Chinese President Hu Jintao after ethnic tensions soared in China's western Xingjiang territory could weaken trust-building discussions on making further progress on climate change. He did leave a national delegation behind.