Vehicle Scrappage Bill Introduced in Both US Senate and House
14 January 2009
A measure introduced by US Senators Dianne Feinstein (D-CA), Susan Collins (R-ME), and Charles Schumer (D-NY) would establish a national voucher program to encourage drivers to trade in older, less fuel efficient cars, trucks or SUVs for a more fuel-efficient vehicles or to use mass transit. Companion legislation was also introduced in the House by Representatives Steve Israel (D-NY), Jay Inslee (D-WA), Barbara Lee (D-CA), and Dennis Moore (D-KS).
The Accelerated Retirement of Inefficient Vehicles Retirement Act of 2009 (ARIVA)—also called the “Cash for Clunkers” program—would reimburse drivers with a credit of up to $4,500 for scrapping vehicles with a when-new fuel economy rating of less than 18 mpg US as reported by the original manufacturer for purposes of CAFE compliance. (CAFE compliance figures are lower than the adjusted EPA fuel economy ratings for consumers.)
Eligible drivers would receive a reimbursement voucher for the purchase of a new or used vehicle with a fuel economy rating that exceeds the CAFE target for that class of vehicle by at least 25%. The bill also requires that the voucher be used towards the purchase of a vehicle that has an MSRP of less than $45,000, is model year 2004 or later, and meets or exceeds federal emissions standards. Drivers who apply for the program must ensure that their vehicles are in driveable condition and are currently registered in the US.
Vouchers could also be redeemed for transit fares for participating local public transportation agencies. The program would operate for four years, from 2000-2012, and is expected to encourage the early retirement of up to one million vehicles per year.
The bill specifies that during the first year of the program, vouchers will be issued for the following amounts:
| First-year ARIVA Voucher Amounts | |||
|---|---|---|---|
| Model Year | New Vehicle Purchase | Used Vehicle Purchase | Mass Transit Credit |
| 2002 and later | $4,500 | $3,000 | $3,000 |
| 1999-2001 | $3,000 | $2,000 | $2,000 |
| 1998 and earlier | $2,000 | $1,500 | $1,500 |
In each subsequent year (2010, 2011, and 2012), the model years would be advanced by one year. Vouchers would be eligible for redemption for up to two years after the date of issuance, and no individual would be eligible to obtain more than one voucher in any three-year period. Dealers, dismantlers and scrap recycling facilities would also be eligible for a payment of $50 per vehicle, or an alternative amount to be specified by the Department of Energy.
Last Congress, we successfully enacted legislation...to improve the fuel efficiency of America’s fleet of new cars, trucks and SUVs by at least 10 miles per gallon over 10 years. But we face real challenges with trying to encourage drivers to trade in their older, less fuel efficient vehicles—particularly in this tough economic climate. This bill will help address that problem...If enacted, this bill would be an important part of helping getting America’s struggling automobile industry back on its feet—and help consumers who are concerned about covering the cost of buying a more fuel efficient vehicle.
—Senator Feinstein
If implemented,the program would, as estimated by the American Council for an Energy-Efficient Economy (ACEEE):
Save between 40,000 to 80,000 barrels per day of motor fuel by the end of the fourth year, (based on an estimated 500,000 to 1,000,000 vouchers issued per year).
Reduce greenhouse gas emissions between 6.6 million metric tons to 7.6 million metric tons, or the equivalent of removing 1.1 million to 2.2 million vehicles from the road in one year, (based on an estimated 500,000 to 1,000,000 vouchers issued per year).
Reduce NOx by 3,043 short tons (2,761 metric tons) by 2013, (based on an estimated 500,000 to 1,000,000 vouchers issued per year).
While participation in the voluntary program is hard to gauge, ACEEE said, its preliminary estimates are that 575,000 vehicles would be retired annually, and that fuel savings would reach 46,000 barrels per day by 2013.
Resources
ACEEE white paper on accelerated vehicle retirement
So...if I'm looking to buy a new Prius in 2010, I should first buy a used POS truck for $800, so I can get the $4,500 voucher and the satisfaction of seeing the truck crushed? Does that work?
Who says environmentalists don't have a sense of humor?
Posted by: HealthyBreeze | 14 January 2009 at 10:58 AM
Variations of this plan have been tried by some states to get rid of highly-polluting vehicles. In general it certainly wasn't the worst way to do it.
We can probably count on the feds to find the worst way.
The Chinese are also scrapping polluting vehicles in some urban areas. Like much of the news from China it is hard to know what is walk and what is talk in pollution matters.
Posted by: Ken | 14 January 2009 at 10:58 AM
Finally, something that makes sense.
Posted by: Gerald Shields | 14 January 2009 at 12:43 PM
Healthybreeze
You are definitely on the right track. I'm going to get so rich.
Posted by: JosephT | 14 January 2009 at 01:23 PM
"So...if I'm looking to buy a new Prius in 2010, I should first buy a used POS truck for $800, so I can get the $4,500 voucher and the satisfaction of seeing the truck crushed? Does that work?"
That will work as long as you can find people who have not heard about this program, who don't know that their old $hit-box is actually worth $thousands.
Posted by: Nat Pearre | 14 January 2009 at 01:31 PM
What I like about this is that it encourages getting a fuel efficient vehicle. You can't, say turn in your clunker then get a Hummer with the voucher.
Posted by: Gerald Shields | 14 January 2009 at 01:39 PM
After the tax breaks that promoted these gas guzzlers in the first place, they are being rewarded again for having driven fuel inefficient vehicles.
Posted by: Arne | 14 January 2009 at 01:54 PM
TradeEV.com :encourage drivers to trade in older, less fuel efficient cars, trucks or SUVs for a more fuel-efficient vehicles ie EV.
Posted by: onlineEV | 14 January 2009 at 02:48 PM
Quoted from the article: "No individual would be able to obtain more than one"
There goes your idea of turning this into a money making scheme.
By the way, good luck finding a model year 2002 or newer truck that is in driveable condition for $800 or any other similarly low amount. If you wait until 2012 you would then need to find a model year 2004 or newer truck.
Posted by: Patrick | 14 January 2009 at 02:48 PM
@ Patrick,
Yep, that's the rub. I could probably find a 9-year old high mileage truck that would still qualify for the $3,000 voucher for less than $3K and still be doing the world a service. Not every truck owner will replace it with a vehicle that qualifies for a voucher. The program sounds like it will work.
Not all vouchers will be redeemed, so for 1 million vehicles scrapped, this probably costs $2 Billion in redeemed vouchers and tens of millions in program administration.
It is also, btw, a subsidy of sorts for car manufacturers.
Posted by: HealthyBreeze | 14 January 2009 at 03:33 PM
So, by buying old POS clunkers and selling them to new car buyers for the voucher - everyone can get another $3-4k subsidy! That'll lower the cost of a Volt to around $26k. Sweet. Applicable also to the hybrid Caddy, Tesla and Fisker we presume.
Posted by: Reel$$ | 14 January 2009 at 05:01 PM
From the above article
"The bill also requires that the voucher be used towards the purchase of a vehicle that has an MSRP of less than $45,000"
So no you can NOT use it to buy a Tesla
Posted by: zevutah | 14 January 2009 at 09:15 PM
Sounds workable and effective – maybe - I wonder how many 2002 big vehicles are worth less than $4500 (or 1998s worth less than $2000)?
I fear that few 1998s are “clunkers” (shouldn’t they say “efficiency challenged”?)
It will create more paperwork for nothing (but NOT pour money out) if it is ineffective.
But they can look good.
I hope the politicians listen to the experts as to predicted effectiveness before they pass this.
Posted by: ToppaTom | 14 January 2009 at 09:25 PM
More people who can't add!
Where does all this money come from? The government’s mythical bottomless pit? The US government only a month ago blew the best part of a $Trillion bailing out Wall street and that all has to be paid back- with interest - to the foreigners who lent us the money.
The Japanese have had a system that puts incentives on premature retirement of new cars (which is what this is - a method to funnel taxpayer funds to subsidise the auto industry) the Japanese increase registration and insurance fees every year until a 5-year-old car is taxed off the road.
The Japanese government doesn't offer to 'buy' it with a voucher.
Posted by: Paul | 14 January 2009 at 11:22 PM
O.K., let's crunch some numbers.
The program is expected to "save between 40,000 to 80,000 barrels per day of motor fuel by the end of the fourth year, (based on an estimated 500,000 to 1,000,000 vouchers issued per year)."
Let's take the middles of both ranges.
We'll save 60,000 barrels/day of motor fuel. I assume they mean gasoline by this, and not crude oil? IIRC you need about two barrels of crude to make one barrel of gasoline. So we would save 120,000 barrels/day of crude, or 43,800,000 barrels/year.
We'll issue 750,000 vouchers/year, at a cost of $4,500 each. Cash outlay will be $3.375 billion.
Divide $3.375 billion by 43,800,000 barrels and you get $77/barrel.
I'm sure that price might have seemed reasonable when this program was being formulated. At today's oil prices, it's not a great deal.
How about cutting the voucher to $3,500 or even $3,000?
Posted by: John L. | 14 January 2009 at 11:29 PM
@John L.
I am not sure what you are aiming at with your calculation, but the oil saved should be computed on the whole life of the vehicle, which could be assumed to be at least 10 years. So the barrels saved are 438 millions, with an investment of $8/barrel.
Anyway, this scheme is introduced to also help the car industry while saving the planet. Part of the investment would then be recovered by VAT and saved jobs. After all if the government put £3 billions the privates are suppposed to put in another £20 billions.
In Italy such scheme has been very popular in the past and helped renew the car stock and lower the pollution created (we weren't talking about peak oil at that time)
Posted by: Alessio | 15 January 2009 at 01:31 AM
This is insane....
Does anyone remember when California did this in the 90's? They did it to get polluting cars off the road.
The law of unintended consequences kicked in, it dovetailed into the collector car/restoration arena. Overnight, full paged adds appeared in Hemmings Motor News with Pro-Collector Car Lobbying groups springing up to save what is a respectable hobby that some very nice people partake in and get great joy out of. The sad part of that is, they had to enter that arena, I do not know if they funded a Lobbyist on the "K" Street Gucci Gulf, but the thought of that is enough to make your skin crawl just to have some clean fun.
Now tell me with these two Intellectual Giants ( sarcasm off ) that something like this won't happen again.....
Posted by: EGeek | 15 January 2009 at 05:40 AM
@ John L and Alessio,
The difference is in the middle. Cars that are already 7-10 years old do not likely have another 10 years, so we're probably getting them off the road for an average of 5 years, but that brings the per-barrel cost down to around $15.
I think the cost is lower than that because A)not all vouchers will be redeemed for $4500, or even $3000 and B)not all vouchers will be redeemed.
Posted by: HealthyBreeze | 15 January 2009 at 08:00 AM
OK, I figured out how to make money on this....when the time comes to sell my Jeep, I will get the voucher for that and buy a replacement for the Jetta that gets 25% better mileage than the Jeep. Then I will sell the Jetta and buy the Tahoe.....
Oh well, the resulting combined milage is less, but at least the price of used SUVs has been subsidized thanks to our goverment and my apprehension about buying another SUV due to their rapid depreciation has been relieved......
This has the potential of being right up there with Corn Ethanol..... another great ripoff of the American taxpayer....
Posted by: MF | 15 January 2009 at 08:39 AM
Another well intentioned government program that will result in fraud, waste & abuse, horrible implementation & angry bureaucrats running the program, and people getting hurt in the end.
Posted by: ejj | 15 January 2009 at 10:31 AM
I think it's lousy that you get $4500 for a new car but only $3000 for mass transit, when mass transit (a) also needs the fed subsidies, (b) helps relieve the pressure for new roads to reduce traffic congestion, and (c) has a network effect where more routes and more frequent runs will be possible as more people use mass transit, all the while (d) lowering fuel consumption more than switching to a higher MPG vehicle.
Posted by: stomv | 15 January 2009 at 11:00 AM
So-called "mass transit" except for a few like NYC's urban, dense, existing (ie paid for), dedicated, subways, is the worst energy wasting scheme that you can devise. It is easy to show that the average mileage for every transit passenger is worse than if we provided them all with a gas-guzzling Suburban; and told them they could never carry as much as a single passenger.
Why is it that there is not a single person proposing this, except the most mentally challenged members of the Democrat Party? Might it be it is really stupid? It is worse than most stupid ideas, I have seen.
Posted by: Stan Peterson | 15 January 2009 at 11:28 AM
Stan,
What have you done today to better mankind's move to more prosperity and cleaner, cheaper abundant energy? For years, you've proffered belligerence in alternative vehicle and fuel forums and for what? If you are anything in "real life" as you come across on the Internet, it is no wonder that you aren't successful selling your ideas.
See Mr. Peterson, it's not good enough just to be arrogant and think you've got all the answers. In the real interactive world, you actually have to work WITH people and cooperate to achieve results. You may actually have some good ideas, but you'll continue to fall short with your polarizing condescension. That and your partisan political rhetoric is why you fail.
Good Day.
Posted by: Huggs From The Heartland | 15 January 2009 at 02:46 PM
Is there a voucher for used soap boxes? There are two available.
Posted by: sulleny | 15 January 2009 at 05:08 PM
Stan:
It's easy huh? Let's see it then. Show us some numbers. I've done the math for Boston's MBTA and you're not even close, if we do the T, bus, or commuter rail [or any combination therein]. It's also worth noting that in addition to being more fuel efficient, mass transit serves to reduce roadway traffic, reduce parking demand, reduce pollution, reduce sprawl, provide a "backup" transit system for personal or city-wide emergency, and provide transportation for people who can't afford to own an auto, not to mention for school children, seniors and the handicapped who can't drive.
And BTW, while it's true that NYC has the majority of subway/train riders in the USA, Atlanta, Baltimore, Boston, Buffalo, Camden/Trenton, Charlotte, Chicago, Cleveland, Dallas, Denver, Houston, Jersey City, Los Angeles, Miami, Minneapolis, New Orleans, Newark, Phoenix, Philadelphia, Pittsburgh, Portland, Sacramento, St. Louis, Salt Lake City, San Diego, San Francisco, San Jose, and Washington, D.C. all have light or heavy rail. Every single one of those cities or regions would benefit from investment in more lines, better track and signals, and more rolling stock.
Posted by: stomv | 26 January 2009 at 05:53 AM