In a sense, we already have a price on carbon. Well, not quite. We have dozens of different prices on carbon, based on the grab-bag of various energy efficiency incentives, renewable energy targets, and other abatement measures already in place. On top of that, we’ve got businesses making investment decisions based on their best guess on future government policy.
We now have another one – $394 per tonne.
Labor has proposed the Cleaner Car Rebate. According to the scheme, if you own a pre-1995 vehicle, and purchase a new vehicle with emissions lower than 220 gm/kilometer (Anything more economical than a Commodore, which is rated at 221 gm/kilometer – frankly, I suspect Holden will pull some infinitesimal fiddle with the electronics to marginally drop the fuel consumption to ensure it qualifies by the time the rebate applies), you’ll get $2000 from the government to scrap your old car.
According to the fact sheet, this will save 1 million tonnes of CO2 over the next decade. The only other benefit mentioned is that the the owners of the new vehicles will collectively save $344 million worth of fuel – an entirely private benefit.
So…394 million dollars to reduce emissions by a million tonnes. Makes the calculation pretty easy – emissions reduction at $394 per tonne! Compared to any number of alternative ways to reduce emissions, it’s ridiculously expensive. It makes putting solar panels on roofs look cheap.
The other problem with this policy is the essentially arbitrary subgroup of owners of old cars who will benefit from this policy. I could be horribly wrong, but I suspect that most people driving 15-year-old cars worth less than $2000 are doing so not by choice but by financial necessity. The majority of those who will take advantage of this subsidy are those whose incomes increase to the point where they can spend a minimum of $13,000 on a brand-new car – indeed, one case study quoted in the fact sheet on the policy is a uni student moving into full-time work. Giving people whose incomes have just substantially increased an additional windfall doesn’t seem the fairest way to spend government money – particularly when they’ll also get the financial benefits of lower fuel bills.
Worse, it seems to me that people will immediately try to figure out how to get around the restriction that you need to have a very old car and be buying a brand-new one, providing opportunities for middlemen to take a cut along the way.
So, let’s summarize. This policy involves spending large amounts of money for a tiny greenhouse benefit, and transfers taxpayer funds to people who, in large part, are able to take advantage of the cash because their income has just increased a lot.
OK, OK. As I’ve noted in the past, there are very considerable safety benefits in taking old cars off the road and replacing them with new ones – particularly as electronic stability control will become compulsory for new vehicles in November 2011. And there is the reduction in urban air pollution, which gets SFA attention in Australia but results in thousands of premature deaths annually.
But there’s no mention of these issues in the policy launch, let alone any apparent attempt to quantify them so consideration can be given to whether this was the best way to achieve such effects.
But let’s assume that this policy is a good way to spend government money. If so, why the hell would we want to restrict the numbers of vehicles crushed under the scheme?
For completion, it should be noted that the European and American cash for clunkers schemes were economic stimulus measures in the context of the GFC. Australia (at least in the opinion of the RBA given its predisposition to further raise interest rates) doesn’t need additional economic stimulus; in any case, the money is taken from other environmental programs so there’s no net stimulus effect.
If this is the quality of policy we’re likely to see from a returned Gillard government, we’re really in trouble.
Update: Quiggin, also not impressed. h/t Mark in comments.
That’s the bit that’s bothering me in the light of recent events. Although I’ve seen numbers indicating that neither the BER nor the insulation scheme was as big a disaster as they were popularly made out to be, there was still clearly a lot of middleperson rorting going on. If Labor haven’t factored some elaborate safeguards against that into this policy then they’re not learning even from their very recent and damaging mistakes.
Doesn’t building a car create more greenhouse gas than driving it for 20 years?
In a word, SATP, no.
The figure is more like a year, last I checked.
These schemes have been taken apart on environmental grounds so often that I can’t believe govts even bother pretending they have an environmental focus.
One possible public health benefit of these wealthier people getting a subsidy though: those who were considering giving their clunker to a newly-qualified 16 year old child to drive might now instead trade it in and buy their child a cheap little runabout with the proceeds. I remember fears being spread around a few years ago of what will happen on our roads when the first generation of widespread 4wd owners start handing them down to their children. If this policy reduces that phenomenon from happening it will have a public health benefit.
Still wouldn’t be money well-spent though, is my guess.
Every identifiable (pre-’95) paddock basher has just increased many-fold in value. The ‘middlemen’ capable of spotting these items will, in the words of that famous ‘up the Windsor Road’ and ex-NSW MP … “let me do a deal for you”.
This is like allowing Harvey Norman get into the pink batts scheme. Dealers will buy the old bangers for normal prices from unsuspecting releived owners, then on-sell the clunker rebate advantage to new car buyers. Buyers won’t get the full $2000 just a nudge inducement along the way. Unless there is some special policing of vehicle ownership details who could blame or fault the middlemen for their enterprise?
It’s a Gillard howler, reminiscent of the over 75′s gold card in pre-election terms.
Pablo: they’ve thought of that one – you have to have owned and registered the car for the past two years.
However, there’s nothing in the policy to say you have to maintain ownership, and use, the new car…which is where the opportunity for arbitrage occurs.
Amen to all that Robert.
In fact I think it’s even worse than you outline, because the evidence as I understand it from the US program which is being shamelessly plagiarised is that that probably made about zero net impact on clunkers being traded in. People held back trading in once the program was announced until it started, and then it also pulled forward demand for trade ins from what would anyway have happened in the 6-12 months post-program. (This fucks up car dealers cash flows in a big way too, but I suppose they are evil capitalists and deserve no sympathy.)
OK, a trade in is not always the same as a removal from the road even for these sorts of cars, but one would be surprised if even the miniscule emissions savings claimed were achieved.
Plus as you point out it is regressive, and not just in subsidising a relatively affluent section of the car buying market; to the extent that it actually does remove potential used cars from the market place, it reduces supply and puts up prices for those able to afford only the very lowest end of the market.
Of course the real problem of principle is not to do with collateral damage of this sort; it is that in the real world one is always destroying wealth if one destroys existing assets that are still productive. And that most Green policies do not regard this as a problem at all.
So let me see. If I add up the school uniform rebate and now the old car rebate maybe she can but my vote. I just hope she does not come up with any policy then I might have to think. Gillard is clearly a policy free zone. This campaing has become a joke.
It seems like a policy from a previous decade, if not a previous century. The cars it targets were made between 1987 and 1995 (nearly all pre-1987 cars still on the road are enthusiasts’ vehicles and/or are worth far more than $2,000). Cars from 1987–95 are not the ‘‘gas-guzzling, pollution-spewing’’ evils that the PM cited (as reported in The Age). They have computer-controlled fuel injection systems, they run on unleaded petrol and have catalytic converters and the other emissions controls required under the Australian Design Rules of the day, and in many cases have smaller engines than the same models carry today. Sure, they’re a bit more pollutey and less fuel-efficient than brand new cars, but not by enough to be worth worrying about.
Of course, this isn’t an environmental measure. It’s one for the car industry, the dealers and the financiers.
Remember Alan Kohler and his cash-for-clunker led recovery in Germany? My guess is that this is another stimulus spend with a green veneer.
John Quiggin:
http://johnquiggin.com/index.php/archives/2010/07/25/votes-for-clunkers/
“But the move will be financed by cutting into existing carbon reduction programs, including $200million from the flagship solar power incentives and $150million off the renewable energy scheme that provides rebates to householders for solar hot water and heat pump systems.
Ms Gillard revealed that a total of $520million in cuts would be made to existing carbon reduction programs, including $150million off the controversial carbon capture and storage research program.”
http://www.theage.com.au/federal-election/solar-plan-raided-to-pay-for-guzzlers-20100724-10pvk.html
I’m waiting to find out which policy genius thought of this. More evidence of the grip of neoliberalism within the ALP. Instead of directing funding towards mass transit the ALP directs funding towards individual transport. That will really help the traffic jams in outer North, West and South Sydney. Hopeless.
Mr Coffee, not all catalytic converters are made equal. Secondly, they have a life; that life is around 12 years, IIRC. Thirdly, they don’t help much if the engine is so clapped it’s burning a 1:1 mix of oil and petrol, which is the case with not a few vehicles of that age.
Not us. Any ‘neoliberal’ worth their salt will tell you that a) this is interfering in the market, which is generally bad; that b) the price of new cars will now mysteriously rise by approximately $2000 and that c) it will hurt the poor by driving up the price of clunkers.
Robert Merkel — I understand that point about catalytic converters, but it doesn’t warrant Commonwealth Government intervention at street level. Same with old engines that emit oily smoke: that’s the business of the registration and environmental protection arms of state governments.
There is no significant population of “gas-guzzling, pollution-spewing” dinosaurs that needs to be wrangled into the tarpits via Commonwealth fiscal muscle. That concept and language is from another era. I reiterate: this is not an environmental measure; it’s a pro-industry one, dressed in green camo.
Here in the Philippines every vehicle has to pass an annual emissions test before renewing registration (the effectiveness of the program is a different issue). A similar test in Australia for cars more than 10 years old would be more appropriate than an across-the-board, non-means-tested cash handout.
There has been considerable tightening of emissions standards since 1995. Compare Euro V to Euro I. However I agree with you that the policy clearly isn’t motivated by this.
I don’t think it’s even that – it’s pure election bribery, directed at people who aren’t going to read the details and find out that they’re not going to be eligible.
What Jacques said. The people I know who would consider themselves neoliberals hate business welfare quite as much as they do any other form of welfare.
This, like Abbott’s immigration “policy” of today, is policy chosen because a soundbite on it might sound plausible to someone who knows nothing about the particular issue and has no intention of learning anything. Elections bring out a lot of this sort of crap simply because there are a lot of voters like that.
A better policy that would have been saleable might have run as follows. Gillard negotiates with the states to provide that at some date in 2013 — 1/7/13 perhaps — no vehicle first registered prior to July 1, 1998* shall be re-registered unless it meets the emissions standards of a suitable reference vehicle current in July 2013. The pool of reference vehicles would be determined on the basis of vehicle type, market segment, price, brake horse power etc.
Each first of the month the clock is reset one month forward.
Anyone with a car running out of date in 1998 is going to think hard about buying a car under ten years old. Cars over about 8 years old are going to decline rapidly in value. Everyone knows their sunk cost has to be recovered on a new vehicle within 15 years.
This would impose one-off sunk cost losses on all current vehicle owners but over time, the trades would work themselves out and be rolled into recurrent car costs.
* special exemptions for qualifying “vintage” or special purpose vehicles
@13 Akn – I guarantee you no policy genius thought of it – it was dreamed up in a politician’s office by a staffer
How is that the case unless every new car purchase will be accompanied by a trade-in of a qualifying clunker? That’s the second time today I’ve heard this furphy. The ratio of rebates vs the number of qualifying cars sold is what exactly? In June 2010 there were 88,000 cars sold across the country. Cash for clunkers will target 200,000 vehicles over 4 years. So that’s 4000 (approx) cars of that 88,000 will have a $2000 rebate applied.
Fran Barlow wrote:
Sadly, most people don’t understand just what odd-ness car enthusiasts will stoop to. “Vintage” to some of the more deranged includes people who pore over build codes to ascertain whether your 1995 Commodore Vacationer was the only one built with metallic paint AND cruise control AND a factory sunroof, thereby making it collectible.
I kid you not.
Ute Man, my uncle will be happy – I think he owns that Commodore Vacationer. But he may have ruined the collectability with the aftermarket towbar…
Jacques and d.d.: neoliberalism is more than merely what its proponents say it is.
To that extent an ALP policy that focusses on individual transport instead of mass transit is firmly within the identifiable philosophy of neoliberalism. Remember Thatcher’s ‘there is no such thing as society’ (or somesuch). Neoliberal emphasis on individualism, expressed through mass consumption of virtually undifferentiated goods, imposes atomised isolation (individualism) without individuality. In contrast, social democracy acknowledges collective goods becuase of its capacity to recognise communal interests. There is such a thing as a collective or social good. Subsidising more cars (even cleaner driving cars) over mass transit exemplifies the neoliberal delusion that owning a car differentiates any car owner from any other; there is the mere semblance of individuality and it comes at immense ecological (pollution) and urban (freeways, traffic jams, roads unsafe for cyclists due to overcrowding etc) costs.
See John Myall’s “Prisons on the Road”.
Ute Man said in part:
I can well believe it.
As to my general idea (I’m assuming that the plan is designed for optics rather than substantial improvements) you could sell it to the states on the basis that the increased churning would lift stamp duty revenue.
At the same time, the increased pool of spares would be good for those with the right vehicles. I’ve always found that getting parts for my TS Astra is a lot harder than it should be.
Fran Barlow, you seem to come from the same school of policy development that came up with the original crackpot idea. Seriously, you have got no idea. If you want a sliding scale for registrations costs where older is more expensive, then look to the Japanese system. Getting owners to conform to newer emmisions standards would be a hilarious suggestion if it seem like you were serious.
Robert Merkel: To reduce the exhaust pollution of individual vehicles the best rebate would be to enable and encourage owners to have the cat convertors replaced with units that have more efficient catalysts and at a distance from the combustion chamber that produces the specific heat required for them to work.
Besides the obvious stupidities of the ALP initiative (documented above by others), it assists industry in another way, in that the environmental impact of cars is reinscribed within political discourse as meaningful. As akn notes, the issue with mass mobility is not the pollution produced by individual cars, but that individual cars are the dominant form of mobility.
akn, what a wonderful logician you are:
“This is Evil
Neoliberals cause Evil
Therefore neoliberals caused this”
To the extent that this policy has any ideology behind it at all (it doesn’t – its a pure election stunt) it is good old-fashioned dirigisme – something much more associated with socialism than neoliberalism.
We would get a far bigger benefit if the grant encouraged people to sell NEWgas guzzlers. New gas guzzlers wil keep on spewing out emisisons for yonks while the old ones would go off the road in a few years anyway. May even be good value for money if we restrict the lurk to serius gas guzzlers.
Better still, the target should be aimed at encouraging people to swap to low cost small cars instead of slightly modified comodores.
One question. Was this scheme already in the planning stage when Rudd was PM? Or has it been entirely cooked up over the past month or so?
I was hoping you might know the answer to that.
Given they’re funding it out of the solar program, I’d guess someone made it up last Friday night