Evaluating “Cash-for-Clunkers”: Program effects on auto sales and the environment

• Published in: Journal of environmental economics and management Vol. 65; no. 2; pp. 175 - 193
• Main Authors: Li, Shanjun, Linn, Joshua, Spiller, Elisheba
• Format: Journal Article
• Language: English
• Published: New York Elsevier Inc 01.03.2013; Elsevier Science Publishing Company, Inc
• Subjects: Auto demand; Automobile sales; Carbon emissions; Cash-for-Clunkers; CO2 emissions; Emissions control; Energy efficiency; Environmental economics; Environmental management; Environmental protection; Hypothesis; Pollutants; Stimuli; Stimulus; Studies; Vehicles; Canada; United States > US; USA; Auto demand; Stimulus; Cash-for-Clunkers; CO2 emissions
• ISSN: 0095-0696; 1096-0449
• DOI: 10.1016/j.jeem.2012.07.004

“Cash-for-Clunkers” was a $3 billion program that attempted to stimulate the U.S. economy and improve the environment by encouraging consumers to retire older vehicles and purchase fuel-efficient new vehicles. We investigate the effects of this program on new vehicle sales and the environment. Using Canada as the control group in a difference-in-differences framework, we find that, of the 0.68 million transactions that occurred under the program, the program increased new vehicle sales only by about 0.37 million during July and August of 2009, implying that approximately 45 percent of the spending went to consumers who would have purchased a new vehicle anyway. Our results cannot reject the hypothesis that there is little or no gain in sales beyond 2009. The program will reduce CO2 emissions by only 9–28.2 million tons based on upper and lower bounds of the estimate of the program effect on sales, implying a cost per ton ranging from $92 to $288 even after accounting for reduced criteria pollutants.