Cash 4 Clunkers– Again?!

Old Ideas, New Applications

dodge caravan vehicle retirement program
Dodge Caravan turned in through the Cash 4 Clunkers program. One of an estimated 695,000 cars removed from the road through this program.

The jury is in: people need to be pushed harder if we hope to achieve climate goals attempting to limit warming to 2º C. For good reason, fleet turnover is at the forefront of that discussion. And perhaps a voluntary accelerated vehicle retirement program will be a big part of that.

Transportation is the largest contributor to greenhouse gas emissions in the United States. We know that the widespread adoption of EVs, despite larger initial emissions, will be essential in our emissions reductions efforts in the coming years (see Yale 2021). EVs are great, but their adoption might not make enough of a difference unless it is sufficiently widespread. For these reasons, experts in the automotive and sustainability fields are paying more attention to the idea of fleet turnover. 

Fleet turnover is typically determined by vehicles’ life spans, which are often maxxed out. Today’s average age of vehicle retirement is 17 years, though Tesla estimates it closer to 22 years.

John Sterman, a MIT professor of system dynamics, says that even if every vehicle sale going forward was electric, “it would take about 20 years before we got to 90 percent [of the national fleet] electric” (Milken Institute Review, Fisher 2023). 

In a piece Sterman co-authored with other members of the MIT Sloan School of Management they make the case for accelerating fleet turnover to meet climate goals. In this research article they suggest government intervention via a new ‘Cash for Clunker’ (C4C) program, claiming C4C can substantially reduce vehicle fleet emissions at a reasonable cost per ton. They emphasize that new iterations of C4C must be limited only to those replacing a gas vehicle with an EV in order to meet emission reduction goals and “boost EV adoption beyond the direct effect of vehicle replacement”.

A voluntary accelerated vehicle retirement program might be just what people need to make the switch.

A 2023 piece by the Milken Institute Review, aptly titled “Cash for Clunkers– Again?” echoes some of these same sentiments and pays homage to the 2009 great recession C4C program under the Obama administration, officially called the Car Allowance Rebate System (CARS). Though short-lived, this program cemented the widespread interest in a C4C program for the U.S…. interest that apparently still remains lively today. 

The OG C4C

A voluntary accelerated vehicle retirement program

Cash for Clunkers, as initially proposed in a 2008 Op-Ed by Alan Blinder for the New York Times, is an umbrella term for scrappage programs in which the government incentivizes retirement for older, less efficient vehicles. At the time, Blinder touts C4C as an eco-friendly way to stimulate the economy whilst targeting government aid towards lower-income segments of the population. 

This idea was propelled forward by the House (not unaided by a spontaneous pitch to Joe Biden on a Baltimore train) and the Car Allowance Rebate System (CARS) was signed into law July 1, 2009. Funding was re-upped July 30th and later exhausted by August 24th of that same year. 

Demand for the program was unparalleled, hence why its duration was so short. While take up was beyond lawmakers’ expectations, the program was not without flaws, many of which only came to light after the end of the program. 

Flaws include the requirements set for auto-dismantlers related to the destruction of the forfeited vehicles. Requirements included mandatory vehicle shredding after 180 days as well as proof of engine destruction. This led to a sleuth of well-documented methods of clunker killing, of which pouring a sodium silicate solution (more or less liquid glass) into the engine was the most popular. While an absolute game changer for the sodium silicate industry, the secondary-consumption automotive industry was less than thrilled with the mandated destruction of so many perfectly reusable parts. 

Many believe C4C significantly reduced supply for the secondary auto industry and in turn, has increased used vehicle prices in the short term (nearly 700,000 vehicles were turned in through the program). SHiFT, cognizant of this incredible waste, aims to permanently retire EOL vehicles while maximizing the material reuse of the vehicle parts, including the engine. While this is a hard balance to strike and regulate, SHiFT’s national partnership network makes it possible.

Effectiveness of C4C in 2009

Once again, the C4C program’s main goals were two-fold: to stimulate the U.S. economy and increase fuel efficiency on American roads. 

Later assessments, using Canada as a counterfactual, determined that the net effect of the program on vehicle sales in 2009 was close to zero; increased demand for eligible vehicles during the program simply displaced vehicle sales from future months (Li, Linn, and Spiller 2012). It essentially pushed new car sales forward, indicated by the fact that national car sales in 2009 more or less remained the same despite the mid-summer buying frenzy induced by the program. 

The extent to which it improved the average fuel efficiency ratings on U.S. roads is unclear. What is clear is that the nearly 675,000 vehicles purchased under the program make up less than 1% of the cars on U.S. roads at the time and thus, impact is innately limited. Despite this, total carbon dioxide emissions reductions from the program land in the range of 8.58 to 28.28 million tons which was about 1.5% of national transportation emissions in 2009 (Li, Linn, and Spiller 2012).

Its efficacy was later assessed in terms of comparison to other emissions reduction methods. While the Obama-era administration C4C was more expensive than a carbon tax or cap and trade program, it was less expensive than other programs including a tax subsidy for EVs. Under CARS, researchers estimated the cost of 1 ton of carbon to be $300 compared to an alternative EV tax subsidy’s $1200 per ton (Gayer and Parker 2013). Today’s subsidies for BEVs fall closer to $350–$500, still leaving C4C programs as a less expensive option.

C4C Rediscovered

And yet, despite all the questions that came with C4C, the idea of putting into place a climate-change era version of the 2009 program seems to be circulating around again. Did time make us forget the flaws or is this simply a really good opportunity to harness the, often disputed, power of a C4C program for a boost to the clean energy transition?

While Sterman offers C4C as a way to speed up fleet transition, others arrive at C4C through their desire for a better managed vehicle retirement system.

A June 2022 Protocol article points towards the Biden-era administration’s push to promote EV adoption and raises the alarm over what is happening to the ICEVs coming off of U.S. roadways. No matter how much fleet turnover the United States sees before 2050, it will not matter if these vehicles are simply exported abroad. As this piece points out, the climate only cares about absolute emissions.

U.S. car exports to low-income countries are increasing annually. In 2021 the U.S. exported $8 billion worth of used passenger vehicles, much of which went to nations in Africa. While these vehicles support mobility needs in their destination countries, this comes at a high cost to human and environmental health. These vehicles are often those that were unable to pass emissions testing in the United States and thus are the most highly polluting vehicles on the road. 

The author calls for a revamped C4C program to curb the sale of harmful vehicles abroad. While importing countries, such as Mauritius, have begun regulating the trade in used vehicles for themselves, the author argues it is on exporting countries to stop sending junk vehicles in the first place. 

Final Thoughts on Voluntary Accelerated Vehicle Retirement Programs

C4C has been offered as a solution to speed fleet transition to EVs. It also has been touted as a potential solution to ensure non-roadworthy vehicles are retired rather than handed off abroad. While there is consensus that C4C’s first run in the U.S. was flawed, no one is quick to throw C4C out entirely. If nothing else, a government-sponsored vehicle retirement program has proven itself powerful. 

SHiFT is a vehicle retirement initiative that has incorporated many of the lessons learned from the 2009 C4C program. Where C4C mandated the destruction of all vehicles’ engines, SHiFT permanently retires gas engines from the roadway by barring recyclers from re-selling them whole. Instead, recyclers are allowed to disassemble the engine and sell it as replacement parts. This protocol ensures the largest reduction of vehicle-related GhG emissions possible. 

SHiFT finds itself in a moment in time where electrification is coming to the masses. This transition will necessitate large-scale ICE vehicle retirement and even more so if the government chooses to incentivize EV ownership as many expect them to. It will certainly be interesting to see in which form this program emerges again. In the mean time SHiFT aims to shape voluntary accelerated vehicle retirement programs for the better.