The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program
Christopher R. Knittel
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
August 31, 2009
The Cash for Clunker program aims to stimulate the economy, provide relief for automobile manufacturers and reduce greenhouse gas emissions. In this research note, I present estimates of the implied cost of carbon dioxide reductions under the Cash for Clunker program. The estimates suggest that the program is an expensive way to reduce greenhouse gases. This is true under a wide range of assumptions regarding the increase in fuel economy of new vehicles purchased under the program, how long the clunkers would have been on the road if not for the program, and whether we account for reductions in criteria pollutants. Conservative estimates of the implied carbon dioxide cost exceed $450 per ton; best case scenario parameter values suggest a cost of carbon dioxide of $200 per ton.
Number of Pages in PDF File: 15
Keywords: Greenhouse gases, climate change, regulation
JEL Classification: N5, N7
Date posted: June 29, 2010
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