The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program

15 Pages Posted: 29 Jun 2010  

Christopher R. Knittel

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: August 31, 2009

Abstract

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.

Keywords: Greenhouse gases, climate change, regulation

JEL Classification: N5, N7

Suggested Citation

Knittel, Christopher R., The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program (August 31, 2009). Available at SSRN: https://ssrn.com/abstract=1630647 or http://dx.doi.org/10.2139/ssrn.1630647

Christopher R. Knittel (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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