Goodbye, Gas Guzzlers? – Washington Post editorial analyses the keys to succesful implementation of US’ Cash for Clunkers” initiative

April 15, 2009 at 12:42 am

Without higher gas taxes, ‘cash for clunkers’ won’t do the job

CAR SALES in Germany jumped an astonishing 40 percent in March, thanks in large part to a “cash for clunkers” program in which the government gave those handing over old-model cars roughly $5,000 toward the purchase of newer, more fuel-efficient vehicles. Lawmakers in the United States have crafted similar proposals, hoping both to provide a boost to the U.S. auto industry and to spur sales of environmentally friendlier cars. But even the best of these proposals is not likely to provide the punch of the German initiative.

A bill co-sponsored by Sens. Dianne Feinstein (D-Calif.), Charles E. Schumer (D-N.Y.) and Susan Collins (R-Maine) offers the most sensible approach. Buyers are eligible for vouchers worth $2,500 to $4,500 toward the purchase of a new car if they turn in older vehicles that get less than 18 miles to the gallon. The older vehicles would be junked and turned into scrap. The new car must have a sticker price of less than $45,000 and surpass fuel economy standards by 25 percent. Buyers may also apply the vouchers to fuel-efficient used cars manufactured after 2003. Vouchers could also be used for participating in public transportation programs. A similar proposal in the House provides credits only for vehicles made or assembled in North America; such a provision is problematic because it could violate free-trade agreements.

But would even a perfectly crafted program trigger the kind of spending spree witnessed in Germany? Unlikely, largely because of simple economics and human nature. In 1999, the German government began to gradually impose an additional tax on each gallon of gas beyond the existing tax; today, the additional tax stands at 50 cents, and high gas prices push consumers toward fuel-efficient cars or public transportation even without additional incentives. Yet the Germans did not stop there. The country announced at the start of this year that it would implement in July a new tax based on carbon dioxide emissions; the larger the car and the greater its emissions, the higher the tax. No wonder, then, that Germans flocked to take advantage of the cash-for-clunkers deal before driving becomes even more expensive.

Click here to read the entire article (free regn. required).

Note: Below is a list of articles on this issue, previously published on TransportGooru. This compilation of articles offer an insight into state of various “Cash for Clunkers” style programs implemented (or currently being debated) across the globe (Germany, UK, etc,). Stay plugged in to TransportGooru for more on this topic in the days to come.

Consumer Assistance to Recycle and Save (CARS) Act revives “Cash for Clunkers” scrapping plan in U.S

Germany plans to extend Abwrackprämie aka “Environmental Bonus”

The bickering starts over the implementation of the Cash for Clunkers legislation

Obama Favors “Cash for Clunkers”

Germany increases subsidy to 5 Billion Euros, tripling incentives for its “Cash for Clunker” (Abwrackprämie) program

Britain mulls implementation of “Cash for Clunkers” scheme to boost ailing auto sales

Where the US stands in pushing “Cash for Clunkers”- Four bills in Congress; Details Needed