Cash for Clunkers

Ford Motor Co. has asked the Canadian government to provide a $3,500 incentive to consumers who buy a new car in 2009. The initiative is supposed to stimulate the flagging auto-industry, and get older vehicles off the road. Ford CEO David Mondragon said they would be replaced by cleaner and safer vehicles.

The scheme has been sold as a win-win: good for the environment and economy. Based on the German model, it will likely stimulate the car industry – in Germany, car sales are up 22 per cent from the year before, and are at their highest level in 10 years. The scheme is so successful that many other countries are thinking of implementing something similar – Britain says a cash incentive scheme is on the horizon, and France, Italy and Spain all offer a similar cash for clunkers program. In the US, a similar proposal didn’t make it into the stimulus package, but has strong support from many in Congress.

The European experience suggests the program is good for job creation. Whether it’s good for the environment is another matter. While emissions of newer cars are lower than older cars – they aren’t that much lower. Between 1987 – 2005, fuel efficiency improved by 24 per cent. Which adds up to an approximate improvement of 1.3 per cent per year, depending on the age of your car. When you factor in the carbon cost of producing a new car, you can see that it’s only going to make a real difference to your vehicle emissions if you have a very old clunker and you buy a very clean, green car. The problem is the people who own clunkers are generally not about to buy a brand new vehicle, even with the incentive. If you have a rust bucket, it’s most likely because you are cash-constrained, and government cash will only take you so far. Considering all these factors, many greenies say this isn’t really going to help the environment much at all. One worked out the cost of the incentive, and said you’d get as much value for money by reclassifying dollar bills as biomass and burning them in power stations. Would that be green power? One can only guess.