Canada Wins Cash for Clunkers Race

President Obama recently signed into law what’s called “cash for clunkers” legislation intended to take gas guzzlers off the road by offering an incentive for owners to upgrade to newer, more efficient cars. This is a really great idea because the program incentivizes the right thing: fuel efficiency. But the legislation has been criticized as more of a support for the ailing auto industry than an energy efficiency program.

In any case, when compared to the Scrap It program in British Columbia, part of the Canadian government’s Retire Your Ride program, the US effort—the Car Allowance Rebate System [CARS]—pales.  

CARS gives the owner of an older (no older than 25 years) car that gets less than 18 miles per gallon a credit toward the purchase or lease of a new passenger car. The credit is based on “the difference between the combined fuel economy of the vehicle that is traded in and that of the new vehicle that is purchased or leased.” The program allows for a bigger credit—$4500—if the new car has a combined fuel economy value that is at least 10 miles per gallon higher than the traded-in vehicle.

So, if I had a 1990 Volvo that gets 17 miles per gallon, I would be eligible for a $4500 credit toward, say, a Toyota Prius, which has a base price of about $22,000. It is actually not that easy to find a spread of 10 miles per gallon between 18 miles per gallon and a new car. Most new cars get more like 21 miles per gallon on the low end.

A good thing about CARS is that it creates a financial incentive for participants to find and buy more fuel efficient cars. But as my colleague Clark Williams-Derry has pointed out a couple of places often buying a new and seemingly more efficient car might not be as efficient as you might think.  What about a bike or a bus pass? The CARS program doesn’t conceive of such a thing. That takes us to BC’s Scrap It program.

Scrap It does provide money for car replacement but does it based not on fuel efficiency but CO2 emissions. The greater the reduction of emissions, the greater the credit toward a new vehicle. The same trade—a 1990 Volvo for a Toyota Hybrid—would get you a credit of CAN$2250 toward the hybrid. 

It’s true this is less money that the CARS program. But overall the Scrap It program provides more options on the incentive side.

What if you wanted a bike instead? The program provides CAN$1200 for a brand new bike. Now, I just took my old bike out for a ride last weekend and it does the job for me. I could replace it with one of these and be quite happy for the rebate I would get for the Volvo.

Scrap It is also consistent with Eric de Place’s point earlier this year that we shouldn’t overlook incentives for not buying a car at all. 

The program also offers generous packages combining credits for bikes, car sharing, and transit.

So, in a nutshell, the CARS program is really about replacing cars with cars. The Scrap It program is focused on energy efficiency and reducing CO2. The best way to do that is to incentivize better miles per gallon along with alternatives. Most people won’t trade a clunker that is the sole mode of transit for a bike, but many people would get rid of a second car in the driveway for a bike.

And the Canadian program guarantees that it will completely and responsibly dispose of the clunker. How is the Canadian program working?  Across Canada, Retire Your Ride (which includes Scrap It) has retired 5,470 cars from the country’s roads with a reduction of 294 tons of CO2 since 2005. The aim is to retire 50,000 cars from the road by 2011.
 
Local programs in Seattle and Portland have similar packages for people who find alternatives to cars. Seattle’s One Less Car program is focused on all drivers and Portland’s TRIP program provides incentives for City employees. The CARS program is just getting underway and over time it should create more options for replacement and sustainable incentives like the ones offered by these local programs and Scrap It.