Cash for Clunkers: Digging Deeper

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The debate over the economic benefits of last summer’s “Cash for Clunkers” program continues. Recently, the White House blog and Edmunds.com exchanged salvos in the argument.  But the economic benefits are only one part of the question. Examining performance metrics other than economic impact — such as the environmental benefits — sheds additional light on what exactly Cash for Clunkers accomplished.

Happily, fedgazette editor Ronald A. Wirtz  has a piece on the website of the Federal Reserve Bank of Minneapolis that digs  into data regarding some of the fuel efficiency savings that the country could gain from Cash for Clunkers.

Wirtz looked at the program in Minnesota, Montana, North Dakota, South Dakota, Wisconsin and the Upper Peninsula of Michigan. He found that gas efficiency gains were genuine, but the devil was in the details. Explained Wirtz:

“Average fuel efficiency between trade-ins and newly purchased vehicles rose about 50 percent, from roughly 15.5 miles per gallon to 24.

“But that covers up a lot of variation, part of which suggests a sop to owners of older, typically larger vehicles who used the opportunity to upgrade to something with only marginally better gas mileage.

“For example, about one quarter of the new vehicles purchased through the clunker program in the Upper Peninsula and the Dakotas had fuel efficiency gains of four miles per gallon or less. In many cases, older trucks and SUVs were simply traded in for newer but only marginally more fuel-efficient versions. Only 10 percent of all vehicles bought in the district under the program got 30 mpg or better.”  (see Chart 1).

The gains shouldn’t  be brushed aside, of course. As Wirtz is careful to note, even seemingly small fuel efficiency upgrades can save enormous amounts of fuel, which becomes more evident when using “Gallons per Thousand Miles” rather than “Miles per Gallon.”

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