Cash for Guzzlers

The House Committee on Energy and Commerce reached an initial agreement on a proposal to promote sales of new automobiles in the U.S. market. The program is designed to increase auto sales and at the same time enhance the fuel efficiency and environmental performance of the U.S. auto fleet. The program resembles an initiative undertaken by the Unocal Corporation in the early 1990s to remove older autos from the market in an effort to find a lower cost approach to meet local air pollution standards.

Whether or not this program will stimulate auto sales is debatable and not the focus of this paper. Instead, this paper examines the program’s impact on U.S. gasoline consumption and tailpipe emissions. While the program may stimulate auto sales, the benefits in reduced demand for gasoline and total loadings of emissions from the tail pipe are minimal.

The “cash for guzzlers” program provides vouchers towards the purchase of a new vehicle if a consumer trades in an older car. A consumer will qualify for a voucher if they turn in a vehicle that achieves less than 18 mpg and replace it with a new car that is at least 4 mpg more efficient. An improvement of 4 mpg yields a voucher worth $3,500 and an improvement of 10 mpg yields a voucher worth $4,500. Under the proposed program consumers may also purchase a SUV or light truck. The new light truck or SUV vehicle must be 2 mpg more efficient in order to earn a $3,500 voucher or 5 mpg more efficient to earn $4,500 voucher. The program seeks to replace one million vehicles and will remain in Read More >>>