IMPORTANT UPDATE (8/7/9 10:30 a.m.) — Please see the comments of my reader “David – NC” below. He caught the error in my calculations and is absolutely correct. The breakeven for a reasonable tradeoff (an 18 mpg clunker turned in for a 28 mpg new vehicle) is 89,090 miles not the 17,640 miles I incorrectly stated. Even under my flawed numbers, the program made little sense from a conservation standpoint — given David’s proper numbers, the cash for clunkers program clearly has no conservation benefits. Thank you David.
There’s been a tremendous amount of press discussing the “cash for clunkers” program. Although ostensibly an economic stimulus measure, proponents of the plan also argue that replacing old, less fuel-efficient vehicles with newer models will enhance energy conservation. In an op-ed in yesterday’s Washington Post, author Gwen Ottinger points out some of the fallacies in the “new is greener” rationale, e.g., confusing efficiency with consumption in appliances, or not taking into account the energy used in the manufacture of the new good.
Although I regard the economic rationale with suspicion, the conservation argument is at least worth examining. That is, even if it doesn’t make economic sense, is there some social good (energy conservation) that is served? The core issue is the amount of energy used in the manufacture of a new automobile and whether that is offset by added fuel efficiency. There are so many variables and assumptions here, that a rough estimate is as good as any. I came across a website with two different estimates for the amount of fuel used in the manufacture of an automobile and its component parts. Perusing the internet, the higher number, 42 barrels of oil, seems to be making the rounds as an accepted estimate. The methodology on these numbers looks a little problematic, but if you assume an oil price of $70/barrel, that means that the energy component of the cost of an average car is $2,940, which seems in the right ballpark relative to the overall cost of the car.
Assuming the 42 barrel number, this equates to 1,764 gallons. Making a further assumption (not correct, but probably accurate enough) that we can use 1:1 equivalency between oil and gasoline, we can ask at what point does the energy conserved through higher fuel efficiency of a new vehicle offset the energy used in the manufacture of that vehicle. Assuming a 10 mpg efficiency difference between the clunker and the new car, the energy usage breakeven is achieved at 17,640 miles.
Based on average driving rates, this suggests that a conservation break-even point is reached at about 18 months, and after that there are net gains in fuel conserved. However, there is a major flaw with this reasoning — it assumes that 1) the old clunker and the new car will be driven equal amounts, are 2) that the clunker will go on forever. A quick perusal of the list of car models being turned in suggests the problems with this argument. Most of the clunker cars are 10-15 years old and presumably have 100,000 to 200,000 miles on them. In a 2+car family, these are probably not the car you take on the long trip, for fuel efficiency let alone the reliability at that age — I would guess that these clunkers are currently driven only half as much as the average car. Moreover, cars of that age are in their final years anyway and would have been replaced within a few years. This added overlay of real world considerations suggests that, in reality, there is no meaningful conservation gain in the cash-for-clunkers program.