Is the car industry’s “Cash for Clunkers” plan better?

Econcartography: Phillips curve, 1980-2005 Guess which country?

The car industry has proposed a revamp of the Gillard Government’s “cash for clunkers” program. They say it will reduce the cost from $400 million to $200 million while still meeting the Government’s target of saving one million tonnes of CO2.

The nub of the proposal is that the rebate on new cars should be increased from $2,000 to $5,000 but targeted strictly at ultra efficient cars like the hybrid Toyota Prius and a number of very small diesel and petrol cars that offer similar levels of efficiency.

This would address a perceived failing of the Gillard Government proposal, which provides the rebate to medium and large cars, including some variants of the new Commodore and Falcon.

Whereas the Government’s proposal would cost a ridiculous $400/tonne of CO2 saved, the industry proposal costs a merely expensive $200 per tonne.

The industry scheme seems like an advance on the original poorly thought-through idea. “Cash for clunkers” was evidently hatched at short notice and released in the heat of the election campaign.

But the modified approach still has drawbacks. It rewards, at taxpayer expense, buyers who would’ve bought ultra-small cars anyway. It’s also likely to increase the price of cheap, old cars and make life a bit harder for drivers confined to this end of the second hand market (although as it only takes 50,000 clunkers off the road it won’t have as big an impact as the Gillard scheme, which eliminates 200,000). And it doesn’t provide an incentive to make all those other small, medium and large cars that most buyers will continue to buy any more efficient. Read the rest of this entry »


Mandatory CO2 emissions – will Julia do enough?

Projected average CO2 emissions of the whole light vehicle fleet under a range of CO2 emission targets for new vehicles

With all the brouhaha about ‘cash for clunkers’, the mainstream media seems to have completely missed analysing a new initiative that was also announced on Saturday by the Prime Minister – mandatory CO2 emission standards for light vehicles.

Prime Minister Gillard committed the Government, if re-elected, to an obligatory average emission standard for new light vehicles of 190 g/km from 2015, and 155 g/km from 2024. This represents a 14% reduction on the 2008 level by 2015 and 30% by 2024.

This is the sort of initiative I’ve argued for before (here and here) as it recognises the reality that light vehicles (i.e. cars, SUVs, vans) will be around for a long time yet and something therefore needs to be done fast to make them more environmentally responsible.

It’s a pity the Government took the spotlight away from this worthwhile initiative by simultaneously announcing the deeply flawed ‘cash for clunkers’ scheme.

Yet the Government’s take on mandatory emissions is far from perfect. In fact it verges on feeble. The standards announced by the Prime Minister are well short of the European CO2 emissions standard, which is currently 160 g/km and by 2015 will be 130 g/km (see here). Read the rest of this entry »


Is Cash for Clunkers a great big new mistake?

Clunker - 1992 Nissan Pulsar

Did Julia Gillard read my post last Thursday arguing that she should take action in the election campaign to improve the fuel efficiency of Australia’s cars? Possibly not, but I wish now I’d left in the sentence saying that whatever happens, please don’t make the same mistake as President Obama and bring in a poorly-designed “cash for clunkers” program!

Now the PM has announced today her own Cash for Clunkers initiative (here and here) with the ostensible purpose of saving one million tonnes in carbon emissions (this is not an annual saving but the total over the life of the scheme).

The scheme will be financed by cutting back other programs, including the solar and carbon capture and storage programs, and the renewable energy bonus scheme (see here).

President Obama at least had the excuse that his scheme was primarily a pump-priming exercise designed to lift consumer spending in the wake of the GFC. In our context however, Cash for Clunkers looks like seriously bad policy. Even on the skimpy detail released today, it is evident there are clear failings. Read the rest of this entry »