'Cash for Clunkers' Environmental Benefits Are in Doubt

Aug. 24, 2009— -- "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.

It is yet another concern about a program that, despite its popularity and success, has been criticized from the beginning.

In late July, when the Car Allowance Rebate System or "CARS" began, surprising demand from consumers led to complaints that the initial $1 billion was not enough. After much debate, with some members of Congress worried that the goal of replacing gas guzzlers with high-mileage cars was not being met, an additional $2 billion was approved.

Then there was grumbling about dwindling supplies of vehicles for sale. General Motors, Ford and other automakers responded by announcing they would increase production. Furthermore, the Transportation Department reassured consumers and dealers that purchased vehicles, even if they were not yet on the lot, would be eligible for the rebate.

Finally, several dealers moaned that it was taking the government too long to reimburse them. To date, more than 600,000 vehicles representing $2.58 billion in rebates have been purchased. Some analysts have calculated that the government has paid dealers for less than 10 percent of the rebates due.

To address the growing pile of dealer submissions, the Transportation Department has tripled the workforce processing the claims to nearly 1,200 (including staff from the press office). Early reports indicated that dealers submitted incomplete and inaccurate forms that required fixes to ensure that taxpayer dollars were not being wasted.

Despite the complaints, however, the program achieved the goal of stimulating car sales.

"It has been successful beyond anyone's imagination," said President Obama Thursday during an interview with radio talk show host Mike Smerconish.

J.D. Power and Associates estimated that total sales in August will surpass the one million mark for the first time in a year thanks in large part to the clunkers program. Edmunds.com estimated that August sales will be near 1.2 million.

In June, before CARS began, nearly 860,000 vehicles were sold.

"This is a wildly successful program," said Transportation Secretary Ray LaHood on ABCNews.com's "Top Line" late last week. "In four days, when we had $1 billion. we sold 250,000 cars. Now, who's to say that's not successful?"