I just read a story this morning suggesting that the “Cash for Clunkers” program is expected to reduce carbon dioxide emissions by only a trivial amount:
‘Cash for clunkers’ effect on pollution? A blip
While the focus of the story is that this won’t do much for climate change, this is the piece that attracted my interest:
America will be using nearly 72 million fewer gallons of gasoline a year because of the program, based on the first quarter-million vehicles replaced. U.S. drivers go through that amount of gas every 4 1/2 hours, according to the Department of Energy.
In the context of the amount of gasoline we use – 140 billion or so gallons per year (a bit less now because of the recession) – this amounts to only 0.05% of our annual gas usage. Experts have suggested that making sure tires are properly inflated could save 3% on gas usage, or 60 times the amount saved by “Cash for Clunkers” if the majority of people are driving around on under-inflated tires.
So, for $1 billion invested in the program, a savings of 72 million gallons means we taxpayers paid $13.89 for each gallon of gasoline/yr saved. Readers know that I am a big fan of much higher fuel efficiency, but $13.89 to save a gallon of gasoline per year? While this benefit will be spread over several years of gasoline savings, surely we can do better than this.
Even if – as one reader suggested – those cars would have been on the road for another 10 years, you are still paying over a buck a gallon for the savings. No doubt that stimulus funds can stimulate in the short term, but what happens when the tax bill comes due? Will we look back on that as a wise use of those funds?
Look at this way: That's 72 million fewer gallons* of corn ethanol we will need to make from natural gas. 😉
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* Or 102 million gallons of ethanol when adjusted for Btu content.
It was the perfect economic stimulas. Automakers needed it. Maybe a few jobs were saved. And,people driving clunkers are for the most part poor. The Ford Focus is the top seller in the program so far. Ford said sales have skyrocketed. They needed the boost.
American natural gas Wendell. Don't forget that part.
Hold on Robert, those vehicles will be around for minimum 10 years. So the whole program is worth more like 720 million gallons saved. So you've bought 720 million gallons for a billion dollars. Right? How is that not a reasonable thing to do?
"American natural gas Wendell. Don't forget that part."
Sort of Maury. Much of the natural gas used to make the nitrogen fertilizer corn farmers need is foreign. Fertilizer companies don't import the NG directly because of logistics, but they do turn the NG into ammonia in overseas Haber-Bosch plants and then import the fertilizer.
So in an indirect fashion, much (about 60%) of our corn gets its needed growing energy from foreign NG.
Ethanol from corn starch is not nearly the "American fuel" ethanol proponents would like us to believe.
Wait a minute. I've talked to people who have actually used the program and to dealers. The reality may be different from the hype.
Most of the people I talked to were planning a new car purchase anyway. They either delayed their decision until the CARS program started, or accelerated it a few months.
Dealers tell me that the cars they are getting are the 2nd and 3rd family cars that generally aren't driven as many miles but were going to be retired soon anyway. This makes sense. You wouldn't trade in a car worth $7,000 for a $4,500 voucher. But you would trade in your old junker.
And,people driving clunkers are for the most part poor.
I haven't seen any numbers, but I expect that those particular folks are still driving their clunkers. I'm betting that the majority of buyers were middle class families with multiple cars, one qualifying, that either had some cash in the bank (because they had reduced their spending in the recession) or good credit (because they hadn't overspent prior to the recession), neither of which the poor have. So the clunker program also functioned as a tax rebate for the middle and upper class. I wonder if next will be an income tax hike on those classes, justified in part on the concept of keeping the net effect neutral, but in the end somebody has to pay for the program.
From the standpoint of "Logic," I guess one could say that the "cash for clunkers" program is kinda goofy.
However, people aren't always, "logical." The program seems to have lit a little spark in the populace; and, right now, we really need a few "sparks."
So, I guess, I'm in favor of it. We've wasted so much money on uber-wealthy bankers, and Wall Stree Elites that I'm glad to see "something" going to the "regular Joe's" of the country.
I think most of our imported fertilizer probably comes from Canada. Some, possibly, from Morocco, with whom we also have a free trade agreement.
Anyway, I would rather spend a few dollars with Canada ( Who buys a LOT of stuff from us, including corn, and DDGS) than a few Hundred with Saudi Arabia, and the UAE (who don't buy much of zip from us.)
So you've bought 720 million gallons for a billion dollars. Right? How is that not a reasonable thing to do?
No, you misunderstand. Perhaps I wasn't clear enough. I am all in favor of programs to save fuel and create jobs. My question is "Is this an efficient usage of funds to achieve that goal?" Let's pretend for a moment that people were going to drive those cars for 10 more years. You have still paid more than $1/gal to save a gallon of gasoline. Even that seems like an awful lot relative to the price of gasoline.
RR
It was the perfect economic stimulas. Automakers needed it. Maybe a few jobs were saved.
Maury, no doubt it was stimulating. But if stimulus really worked like that in the long run, then the government should buy people all sorts of things. Jobs would be created. The economy would be stimulated. But at some point, the bills are going to come due. That is my point here. For a billion dollars – that must eventually be paid back – is this really an efficient long-term use of that money?
RR
Jevons Paradox indicates that the newer more efficient vehicles will be driven further than the old less efficient clunkers. Hence, energy savings will be less.
Now, how about a program for electric vehicles only as replacements? Boost an industry AND reduce crude oil usage.
To put it in perspective, we just, in the last couple of weeks, brought another 480 Million Gallons of Ethanol online.
This brings us up over 11 Billion, Five Hundred Million Gallons, Annually. Volumetrically, this is in the neighborhood of 8.2% of our gasoline consumption.
Allowing for a 2% loss of efficiency when blended into E10, and burned in "today's" motors, that would still be the equivalent of about 9.2 Billion Gallons of Gasoline replaced. Or, 1200% more effect than "cash for clunkers."
Allowing for a 2% loss of efficiency when blended into E10, and burned in "today's" motors, that would still be the equivalent of about 9.2 Billion Gallons of Gasoline replaced. Or, 1200% more effect than "cash for clunkers."
While we would disagree on some of the details of what you just wrote, I agree with the spirit. That is the point of my essay. There are ways to get far more bang for the buck, in my opinion.
RR
Ethanol Production in the U.S. – 201 Operating Refineries
I think SamG's point is worth echoing. It's 72 million gallons a year and the levelized cost would be much lower than $13/gallon whether you assume that the gas savings are for 3,5, or 10 years.
Similarly, it's a small proportion of overall gas consumption, but 250,000 vehicles is a small proportion of the US vehicle fleet (let alone all oil consumers).
The inflating tires point is a bit misleading too because it's assuming a 100% participation rate. While I inflate my tires frequently, I don't believe everyone is going to as well. If 100% of American drivers saw the same increase in mpg as the cars in the cash-for-clunkers program, we'd see a decrease in oil consumption of at least 20%.
While cash-for-clunkers is not a perfect program, it's not as bad as this blog post makes it sound.
"I think most of our imported fertilizer probably comes from Canada. Some, possibly, from Morocco…"
Rufus ~
Primary sources of imported nitrogen made from foreign NG are Canada, Trinidad-Tobago, Venezuela, and Ukraine.
According to the USDA, 52% of nitrogen and 85% of the potash our farmers use is imported: U.S. Fertilizer Imports/Exports
While cash-for-clunkers is not a perfect program, it's not as bad as this blog post makes it sound.
Here is the point I am arguing: What we got wasn't worth $1 billion.
Ask yourself this. Would it have been worth $2 billion for the same savings? $10 billion? Why? What metric do you use to value what we got for the money?
RR
Wendell, thanks for the info. I'm having a problem making the website work, but I imagine rebooting my computer will take care of that.
I'm assuming that I was right about Canada being the largest "exporter" of fertilizer to the U.S. I forgot about Trinidad-Tobago, and Ukraine.
Interestingly, we're using quite a bit less fertilizer/bu of corn than we were a couple of decades, ago. Maybe it's a result of nature supplying more "natural" CO2 fertilizer. Or better seeds. Or, Both.
I gotta say, this might be one federal program I like.
It is all of $1 billion, or 1/185th of what Bush spent on AIG. It is also one-tenth of one percent of the cost of the war in Iraq, Afgahnie and Pakistan (extended by Obama).
It does get low mpg cars off the road. It seems to really stimulate sales, unlike all other federal stimulus spending.
It is a limited time program–unlike our Department of Agriculture, which will be there, ever larger and bigger, 80 years after the Dust Bowl, or mor likely, in eternity.
Cash for clunkers is sunsetted, even if it is extended.
Anything that reduces oil imports is good, and this does that. That extra money will circulate in our own economy.
If the cars save gasoline for 10 years, that will be $720 million more recirculating in our economy, prorated through 10 years. You could do some figuring, but gievn that each dollar will circulate a few times each year, that looks like a win.
Hey, at the bottom of a recession, a program that actually stimulates auto sales is okay by me. Americans need to feel some sort confidence again.
We are talking about $1 billion, not $1 trillion to build an Islamic-fascist-socialist-crony state in Iraq.
If we can pour a few trillion into banker's hands, and tens of billions every year into farmers hands, why can we not help our industrial base now and then?
"Ethanol Production in the U.S. – 201 Operating Refineries"
Rufus ~
It's interesting they use the euphemism "biorefineries" instead of calling them what they are — stills.
Must of been on the advice of some high-priced consulting/polling/public image firm, don't you think?
The cash for clunkers deal is great politics (it takes great advantage of America's emotional attachment to autos), but a pretty poor investment in saving energy. Don't forget all the embodied energy in the new cars and in the old ones which must be 100% scrapped per the law. It might be better to tune up most of the old cars to keep them running well for a few more years, excepting the worst of the gas guzzlers. $1 billion would pay for a few million tune ups and smog control improvements.
If you want to reduce dependence on foreign oil, how about subsidizing half the cost of some high efficiency gas furnaces to replace old heating oil ones?
🙂
Yeah, when they were chasing my Grand-Pappy around, they were accusing him of operating a "still."
He shoulda just told'em it was a "Biorefinery."
They just had a guy from NADA on CNBC, while ago, and he said that the C f C was driving sales "all over the board."
It seems people are coming into the showrooms, finding out they don't "qualify," and trading, anyway. Also, even "Used Car" sales are surging.
I think it's a fairly small price to pay to get people "excited," and moving around.
"And,people driving clunkers are for the most part poor."
Maury,
Poor people may be driving clunkers, but they aren't taking advantage of the program — they can't. Even with the $4,500 payment they don't have the money, or can't qualify for a loan.
Most of the participants are middle-class and upper-middle-class people who bought SUVs or heavy pick-up trucks over the last 15 years and after last summer's gas price shock, are finally seeing the folly of their purchases, and are now jumping at the chance to get rid of them.
As someone who in my entire life has never owned a car that got less than 18 mpg, while happy to see those cars off the road, I'm somewhat put out that Congress is helping the wasteful, shallow people who jumped on the SUV fad, while ignoring the practical, resourceful people.
It reminds me of the old Aesop fable of the grasshopper and the ant. The wasteful SUV buyers who lived for the moment and didn't plan ahead, now expect the resourceful ants to save their bacon.
Ask yourself this. Would it have been worth $2 billion for the same savings? $10 billion? Why? What metric do you use to value what we got for the money?
It's a good question. Let's say the savings do go on for 10 years, which is the high end of the range. From a carbon perspective, the cost of abatement of CO2 is then $156/metric ton(assuming 113 gallons of gas is equal to a metric ton). Is that extremely high? Yes.
But if we're going to subsidize the auto industry, at least there are some clear societal benefits. In comparison, the tax credit for first time home buyers doesn't seem to have any.
It would be interesting to see how the cost to taxpayers compares between the tax credits given for hybrids and the cash-for-clunkers program . From a cost of carbon abatement perspective, I wouldn't be surprised if cash-for-clunkers is technically more cost-effective, though still overpriced.
I wonder if the Xprize for 10 million will have an overall more important result in fuel savings.
Here are the teams that I am following http://takchesstoi.blogspot.com/2008/10/blog-post_7814.html
In today's news:
More than half of the new cars being bought as part of "Cash for Clunkers" deals are foreign brands, the government said today in releasing some of the latest figures.
The disclosure that 55% of vehicles being purchased under the program are foreign makes — mostly Japanese and South Korean brands — could raising questions about whether the stimulus benefits American auto workers, or those in Asia.
Anon, where it's made, not the brand, ought be of more interest to those that deeply care about "buying American".
Chevy Aveo (a fairly nice, fuel efficient car) is made in Korea, for instance.
And similarly there are Toyota Camrys, Corollas, RAV4s and Hyundai Sonatas assembled in the US.
To have real impact, Congress should delay the next round until next year when a lot of the new electric models or the high mpg models from Europe will be available.
Because nothing makes politicians happier than giving money away, I'm not holding my breath expecting that to happen.
Electric models and hybrids (and CNG cars) already have their own separate incentives.
"In comparison, the tax credit for first time home buyers doesn't seem to have any."
My daughter is buying a $178,000 house for $76,000. New construction. Thanks to the first time homebuyers program and a community redevelopment grant. Then,she'll get $8000 back come tax time. The government is throwing everything it's got at the housing market. I hope it works.
Imports were already 31% of new car retail sales in 2007, with the Big 3 sharing 38%, so a shift in favor of imports isn't surprising. The median age of cars and light trucks is 9.4 and 7.6 years respectively, with a mean of 7.5 for the total.
Rufus – the target for ethanol this year is 11.1 billion gallons: RFA – Resource Center – Renewable Fuels Standard. Why would they be exceeding the target? That wasn't the case in years past. Production decreased 8.46 mg in May: RFA – The Industry – Statistics Of course this is just a monthly blip, but I don't see anything on the RFA's news page about capacity expanding like you say – unless your news source is different. Or are you averaging out the year's gains?
This is year 1 for "Advanced Biofuels" to make a contribution as well.
Maury
How many square feet and bedrooms in that new house?
1360 living. 1890 total Kit. Here's the builders website.
http://www.violabuilthomes.com/andersonplace.html
These guys bundled the different grants into a soft second. The $50,000 grew into $83,000 before it was done.
http://www.peoplescommunityla.com/anderson_place.html
Dude, when the rack price of gasoline is less than the price of ethanol the jobbers will only use as much ethanol as they have to (more or less.) This was the case earlier in the year.
Today, ethanol is wholesaling (especially after "tax credit") for considerably less than gasoline. As a result, the blenders are putting in all they can – 10% in most cases.
I click over to that RFA website once a week, or so. Production has been stuck at 11,057,000,000 for several weeks. Today, was the first time I saw the 11,532,000,000.
Now that ethanol is "profitable" for the blenders, again, a lot of the ethanol companies that screwed up shorting corn all the way up, last year, and then "locking in" at the top, and ended up in bancruptcy are starting to get bought, and reopened.
This is not so great for the established blenders that kept their head and stayed in business through the silliness, but it's great for consumers.
According to E85prices.com the spread between E85, and gasoline is now up to 22%. I can, now, run my FFV Impala for a few cents less on E85 than on Gasoline.
Maury
It looks like your daughter a sweet deal. The $178,000 listing price is a little high for the new house of that size unless there is something special for the location.
As I've said before, CforC has almost nothing to do with saving fuel; it is a back-door bailout for Detroit, much as ethanol is a back-door bailout for farmers.
Ten years is a very high life expectancy for old, thirsty vehicles in times of high fuel prices. Those Explorers and Jimmies and V8 Crown Vics were going to meet the crusher fairly soon anyway, just as their muscle-car predecessors did in the late 70's. All of that happened without any subsidy bill.
If we posulate an average lifespan of 3 years for those vehicles, we paid on the order of $4.60/gallon for the fuel that will be saved. The only thing this bill was intended to buy is votes. Looks like it succeeded.
New numbers in, now that Cash for Clunkers is over.
http://green.autoblog.com/2009/08/26/cash-for-clunkers-final-numbers-690-000-vehicles-sold-2-8-bil/
690,114 vouchers submitted asking for $2.877 billion. Add in $100 million in administrative costs for a total of $2.977 billion.
Clunkers averaged 15.8 mpg. At 15,000 miles per year that would total 949.4 gal/year for each vehicle, or 655 million gal/yr for all the vehicles. The new vehicles averaged 24.9 mpg or 602.4 gal/year each, or 416 million gal/yr total. Net savings, 239 million gal/yr, or $12.5/gal/yr. Not that much different from the $13.90/gal/yr previously calculated.
239 million gal/yr saved is 0.17% of our annual gas usage, which is still much less than could be saved by keeping tires properly inflated.