The Real Lesson from "Cash for Clunkers"

While the Obama Administration's early work to raise vehicle fuel economy standards and invest in renewable energy sources has received only moderate media attention, "Cash for Clunkers" has been a continuous front-page story from the first. And ironically, it's this perceived newsworthy-ness that really underlines the true importance of the program.

Cash for Clunkers, which expires today, made only the merest dent in US global warming pollution. Basically, the program subsidized the cost of trading in your gas guzzler for a more efficient vehicle. It gave the faltering auto industry a shot of adrenaline, and probably worked out great for the roughly 700,000 people who took advantage of it to buy new cars. But 700,000 is still a tiny fraction of the US population, and as a means of reducing global warming pollution, Cash for Clunkers leaves a lot to be desired.

The most effective way for the US to reduce its carbon footprint is not through one-shot deals that reach only a very limited number of people, but through long term investments that reverberate through the economy. Measures such as increasing fuel mileage standards for all vehicles, setting energy efficiency standards for buildings and appliances, and investments in clean, renewable energy are the steps that will really move us beyond the age of oil, coal, and other fossil fuels.

Yet if Cash for Clunkers did not in itself make a large impact on pollution, the lessons which consumers, politicians, and car manufacturers can learn from the program promise to have much more lasting impact.

One news story after another has hailed the program as wildly successful with both consumers and car dealers. After the first billion dollars set aside for Cash for Clunkers was used up much faster than expected, the federal government even added an additional two billion to keep it alive a bit longer. The take home message? US consumers are excited about fuel-efficient cars.

Cash for Clunkers captured the attention of the mainstream media in a way that more traditional measures to decrease pollution simply haven't been able to do. By now, even if you didn't trade in a clunker yourself, you've probably read about the thousands of people who have. The lesson for policy makers is that environmentally-minded projects can be wildly popular with voters. The lesson for car manufacturers is that, now that Cash for Clunkers is over, the best way to recover from economic paralysis is to start churning out fuel-efficient models. The lesson for consumers is that government policies to wean us off fossil fuels can save you money, too.

Perhaps Cash for Clunkers has finally driven home the message that increasing fuel mileage isn't just good for the planet: it's good for the auto industry as well. Let's hope Ford and GM are watching.