Do Public Subsidies Sell Green Cars? Evidence from the U.S. 'Cash for Clunkers' Program

15 Pages Posted: 17 Apr 2010 Last revised: 7 Jun 2014

See all articles by Edward Huang

Edward Huang

TripNotice.com; Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA)

Date Written: July 27, 2010

Abstract

One question surrounding the 2009 U.S. “Cash for Clunkers” program is whether it induced consumers to purchase greener vehicles than they would otherwise have purchased. This paper views the program as a natural experiment, which offered higher rebates to consumers buying more fuel-efficient vehicles, and shows that awarding an extra $1,000 on a vehicle made 7.2% of consumers switch to it. Hence the program, giving away nearly $3 billion, should have drawn many consumers to the subsidized greener vehicles, producing substantial environmental gains. This finding should interest policymakers evaluating similar programs to stimulate the economy while aiding the environment.

Keywords: Public Subsides, Vehicle Choice, Environmental Policy, Energy Policy

JEL Classification: Q58, Q48, R48, H23

Suggested Citation

Huang, Edward, Do Public Subsidies Sell Green Cars? Evidence from the U.S. 'Cash for Clunkers' Program (July 27, 2010). Available at SSRN: https://ssrn.com/abstract=1591323 or http://dx.doi.org/10.2139/ssrn.1591323

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