We've made the argument before--stimulus policy should target stimulus, environmental policy should target environmental goals. But using stimulus policy to address environmental goals is a slippery slope. Why? Because, any environmental benefits are likely to be higher cost than if they were targeted directly, and the likely environmental benefits will be lower than desirable. While we've been mocked for making that claim, we're not alone:
"Cash for Clunkers" has generated a surge in car and truck sales, as well as a comparable increase in complaints about the program. But whether or not the program -- which is due to end at the end of the day today -- meets environmental goals of reducing gasoline consumption and greenhouse gas emissions has received less attention.
"As an environmental program, Cash for Clunkers is basically overpaying for the environmental benefits," said Christopher Knittle, an economics professor at the University of California at Davis who analyzed the Cash for Clunkers impact on the environment.
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Knittel, the economist at Davis who has studied gas prices and their effects on driving behavior, found that while the program might benefit the economy, it is an inefficient way to take older cars off the road, to lower carbon emissions and to reduce gasoline consumption.
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But as concerns mount about reducing U.S. dependence on foreign oil and the increase in CO2 levels, analysts acknowledge that making significant headway is not always easy, quick, inexpensive or palatable. Expecting more from the Cash for Clunker program might be too much.
"It is baby step," said Knittle, "but probably an expensive baby step."
I agree. I don't think Cash for Clunkers was a bad idea. I'm just concerned that using stimulus policy to target environmental goals provides inaccurate evidence that achieving environmental goals is expensive and may make it more difficult to get economically sound, more efficient, environmental policy passed in the future.
