A Clean Air Option: Cash for Clunkers

A Clean Air Option: Cash for Clunkers

96-766 ENR
September 16, 1996
CRS Report for Congress
Received through the CRS Web
A Clean Air Option: Cash for Clunkers
David M. Bearden
Environment and Natural Resources Policy Division
Summary
The Clean Air Act Amendments of 1990 encourage states to pursue market-based
approaches to improve air quality.1 An Accelerated Vehicle Retirement (AVR) program,
commonly referred to as Cash for Clunkers, is designed to provide an economic incentive
for the owners of highly polluting vehicles to retire their automobiles permanently from
use and to provide greater flexibility for private industry to reduce emissions by
sponsoring such a program. As an alternative to retiring vehicles, some programs also
may offer to pay for repairing certain automobiles to comply with a state’s emissions
standards.
A small number of states have tested AVR programs or are developing ones for
future use. This report includes information on completed pilot projects in California,
Colorado, Delaware, and Illinois and on the current status of AVR programs in
California, Illinois, Texas, and Virginia. Other states may be considering AVR programs.
So far, states have implemented these programs on a small scale as an experiment to
assess their ability to reduce emissions.
AVR programs could benefit private industry, state governments, and the public by
providing a potentially more economical and flexible approach to improving air quality.
However, implementing an AVR program can be controversial. Automobile collectors
and the automobile repair industry frequently oppose retiring vehicles.
Misunderstandings over the voluntary nature of these programs have contributed to other
opposition. AVR programs encourage owners to voluntarily retire highly polluting
vehicles from use but do not require owners to do so.
Background
The objective of an AVR program is to provide an economic incentive for owners of
highly polluting vehicles to retire their automobiles permanently from use or to repair them
to comply with a state’s emissions standards and to provide private industry with greater
1 42 U.S.C. 7410. State Implementation Plans for National Primary and Secondary Ambient
Air Quality Standards.
Congressional Research Service ˜ The Library of Congress

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flexibility and a more cost-effective option in meeting emissions requirements. Private
corporations may earn pollution credits for contributing funding to a program to purchase
eligible vehicles.2 A state or a sponsoring corporation would offer to purchase a highly
polluting vehicle from the owner at a fixed price. If the owner agrees to sell the vehicle,
a program would permanently remove it from the road by scrapping it and recycling the
metal. Some programs also may offer to pay the owner for repairing a vehicle so that it
complies with the state’s emissions standards.
The extent to which a state or a sponsoring corporation may be involved in
implementing an AVR program can vary widely. Some states may entirely administer a
program and limit a sponsoring corporation’s involvement to funding the purchase of
eligible vehicles. Other states may limit their involvement to awarding pollution credits
and require a sponsoring corporation to assume a primary role in administering and
funding a program. AVR programs also are not limited to a single corporate sponsor;
multiple corporations may collaborate to fund a program jointly to earn pollution credits.
In February 1993, the Environmental Protection Agency (EPA) issued guidelines to
assist states in developing an AVR program and in estimating the amount of the pollution
credit to award to a sponsoring corporation.3 These guidelines are not exhaustive, and
states have the flexibility to tailor a program to address local interests and the needs of
participating corporations. However, if a state includes an AVR program in its State
Implementation Plan (SIP) to meet federal air quality standards, the EPA would review
the proposal for the program.4
Proponents argue that AVR programs could provide states with another option to
meet federal air quality standards, allow private industry greater flexibility in meeting
emissions requirements, and offer the public an economic incentive to improve air quality.
However, implementing an AVR program is potentially controversial. Automobile
collectors are concerned that a program may scrap vintage vehicles, and the automobile
repair industry argues that retiring vehicles may reduce the parts supply for older
automobiles and decrease the demand for repairs. Programs can address these concerns
by restricting vintage vehicles from eligibility, allowing the public to purchase parts before
scrapping vehicles, and including an option to repair certain vehicles. Some also argue
that retiring the oldest vehicles could reduce the public’s access to the most affordable
automobiles. Misunderstandings about the voluntary nature of these programs have
caused some to claim that state governments may confiscate and scrap a highly polluting
2 A private corporation may earn a pollution credit by reducing emissions from sources other
than its own and apply the credit to ease emissions requirements on its stationary sources such as
smokestacks. For example, contributing funding to an AVR program may be more economically
attractive than modifying a stationary source to pollute less.
3 58 Federal Register 11111, February 23, 1993.
4 The Clean Air Act requires each state to submit a State Implementation Plan to define its
strategy for achieving or maintaining National Ambient Air Quality Standards (NAAQS). States
have the flexibility to develop a variety of measures to improve air quality. The EPA reviews each
state’s plan to evaluate whether it will meet NAAQS and may reject or revise either the entire plan
or specific measures that fail to reduce emissions sufficiently to meet these standards. A state may
suffer penalties, such as a reduction in federal highway funding, if it does not alter its plan
according to EPA’s revisions.

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vehicle without the owner’s consent. AVR programs encourage owners of highly
polluting vehicles to voluntarily retire their automobiles from use but do not require
owners to do so.
Developing a Program
States use a variety of titles to refer to an AVR program. The most common titles
are Accelerated or Advanced Vehicle Retirement, Cash for Clunkers, Clean Cars, and
Vehicle Scrappage programs. The following factors are integral to developing a program
and determine how it functions:
Eligibility
The two most common methods to identify eligible vehicles are by model year and
by emissions waivers. Selecting a vehicle by model year assumes that the oldest
automobiles will be the highest polluters, but some argue that an older automobile that is
well maintained may not necessarily be a high polluter. If a program uses the model year
to determine whether a vehicle is eligible, the automobile must have been registered for
recent use in the local area. Selecting waivered vehicles ensures that the program will
identify high polluters. State inspection and maintenance (I&M) programs require a
vehicle to meet mechanical or emissions requirements before registering it and granting a
valid license tag for operation on public roads. The owners of vehicles that fail to meet
requirements typically are allowed a grace period to make repairs necessary to correct any
noted deficiencies. If the cost to repair the vehicle exceeds the limit established by the
I&M program (generally less than $450), the owner usually receives a waiver to register
the vehicle and obtain a license tag.
Purchase Price
A state or sponsoring corporation would offer a fixed price to purchase an eligible
vehicle from the owner. If the price is too low, the program will not be able to attract
enough vehicles to reduce emissions significantly. If the price is too high, the total cost
of the program may exceed other options for reducing the same amount of overall
emissions. A program may offer a single price or may use a scale of prices based on the
model year. Purchase prices have ranged from $500 to $1,000 in past programs.
To Scrap or Repair
AVR programs retire purchased vehicles by scrapping them and recycling the metal,
but repairing certain vehicles also can be effective in reducing emissions. Scrapping the
oldest and most polluting vehicles may be more economical for a program because the
repair cost may exceed the purchase price.

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State Programs
Completed Pilot Projects
A few states have experimented with AVR programs on a small scale to test their
ability to improve air quality. California, Colorado, Delaware, and Illinois have completed
pilot projects and have conducted studies to estimate the impact of retiring and repairing
vehicles on emissions levels. The most common method to estimate the amount of
reduced emissions was to select a random sample of purchased vehicles and measure the
exhaust at the tailpipe before scrapping or repairing them. Of these four states, Illinois
was the only state to measure the tailpipe emissions of each purchased vehicle instead of
using a random sample.
California.5 In 1990, the Union Oil Company of California (Unocal) worked with
the state’s South Coast Air Quality Management District in the Los Angeles metropolitan
area to implement the first AVR program, the South Coast Recycled Auto Project
(SCRAP). Vehicles older than the 1971 model year and that had been registered for use
in the Los Angeles area for at least 6 months were eligible. Unocal purchased each eligible
vehicle for $700 from the owner and then crushed the vehicles to recycle the metal. The
program scrapped 8,376 vehicles and estimated that it reduced 12.8 million pounds of
pollutants (including hydrocarbons, carbon monoxide, and nitrogen oxide).6
Colorado.7 From December 1993 to April 1994, the state implemented a Total Clean
Cars Program that included an AVR program in the Denver metropolitan area. Total
Petroleum Inc. donated $500,000 to purchase eligible vehicles. The program identified
eligible vehicles using emissions waivers and the state’s Smoking Vehicles Hotline. It
scrapped older vehicles that were not economically feasible to repair but repaired newer
vehicles to meet state inspection standards. The purchase price for each scrapped vehicle
was $1,000, and the program paid up to $500 to repair a vehicle. Before scrapping
vehicles, the state notified the public through the Old Car Council to allow collectors to
salvage parts. The program scrapped 271 vehicles and repaired 218. The state estimated
that the program reduced 204.6 tons of carbon monoxide at a cost of $2,294 per ton and
41 tons of hydrocarbons at a cost of $11,438 per ton.
Delaware.8 In 1992, the U.S. Generating Company, an independent electric power
producer, and the Delaware Department of Transportation implemented an AVR program.
5 The Union Oil Company of California. SCRAP: A Clean Air Initiative from Unocal. 1991.
Los Angeles, California. pp. 1-3.
6 The Office of Technology Assessment analyzed the costs and benefits of a vehicle
retirement program using data from this pilot project.
U.S. Congress. Office of Technology Assessment. Retiring Old Cars: Programs to Save
Gasoline and Reduce Emissions, OTA-E-536. July 1992. Washington, DC. 30 p.
7 Colorado Department of Public Health and Environment. Review and Analysis of the Total
Clean Cars Program. December 1994. Denver, Colorado. pp. I1-I5.
8 Resources for the Future. “Will Speeding the Retirement of Old Cars Improve Air
Quality?” Resources. Spring 1994. Washington, DC. pp. 7-15.

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Vehicles older than the 1980 model year or that had received emissions waivers were
eligible. The program scrapped 60 waivered vehicles and 65 pre-1980 vehicles. The U.S.
Generating Company purchased each vehicle from the owner for $500. Resources for the
Future studied Delaware’s program and estimated that it reduced hydrocarbons by 15 tons
at a cost of $4,000 per ton for the waivered vehicles and at a slightly higher cost for the
pre-1980 vehicles. The study compared this cost to the option of using reformulated
gasoline to reduce hydrocarbons and estimated that the cost would have been $3,900 per
ton, slightly less than the per vehicle cost of the AVR program.
Illinois.9 In 1993, the Illinois Environmental Protection Agency implemented an
AVR program in the Chicago metropolitan area in cooperation with Abbott Labs, Amoco
Oil, Clark Oil, Commonwealth Edison, Mobil Oil, Peoples Gas, and Unoven Oil. Vehicles
older than the 1980 model year or that had received emissions waivers were eligible. The
program purchased and scrapped 207 vehicles. The price paid for each vehicle ranged
from $647 for a 1968 model year automobile to $902 for a 1979 model year automobile.
The program estimated that it reduced 43.6 tons of hydrocarbons at a cost of $7,575 per
ton and 7 tons of nitrogen oxide at a cost of $47,205 per ton. A survey of participants
indicated that 1984 was the average model year for a vehicle that replaced a scrapped one.
Current Status
Of the following states, Texas and Virginia have designed AVR programs but are not
operating them, and California and Illinois are developing large scale programs to
implement in future years. Some small AVR programs currently are operating in
California. Other states may be considering AVR programs, but telephone contacts with
EPA and state officials did not identify any additional state programs.
California.10 California’s SIP includes a measure to develop an AVR program that
would begin in 1999 and continue through 2010. From 1997 to early 1999, the state will
conduct a pilot project to determine how to design the most effective program. Beginning
in late 1999, the state plans to scrap 75,000 vehicles per year in the South Coast Air Basin
through 2010. The California Air Resources Board (CARB) is developing regulations for
the program and is conducting workshops with the public to address the interests of
automobile collectors and the automobile repair industry. The state’s air quality
management districts currently are operating AVR programs, but the large scale program
will incorporate them when it begins in 1999. Some have questioned whether scrapping
75,000 vehicles per year will achieve the program’s goal of reducing 25 tons of pollutants
per day. The CARB recently indicated that the program may need to scrap as many as
275,000 vehicles in 2010 to attain this goal. The Union of Concerned Scientists (UCS)
estimates that the program would achieve only 40% of the projected reduction in
emissions.11
9 Illinois Environmental Protection Agency. Pilot Project for Vehicle Scrapping in Illinois:
1992 Cash for Illinois Clunkers. May 1993. Springfield, Illinois. pp. 1-6
10 Telephone interview with Krista Fregoso, California Environmental Protection Agency.
11 California Environmental Protection Agency. Inside CAL EPA. July 12, 1996.
Sacramento, California. pp. 6-7.

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Illinois.12 The Illinois Department of Environmental Protection is developing rules
for an AVR program to implement in future years. The state considers its pilot project in
1993 to have been successful in reducing emissions and plans to implement its new
program on a larger scale across the entire state. Some private corporations have
expressed an interest in contributing funding to the future program to earn pollution
credits.
Texas.13 The state has an AVR program but is not operating it because private
industry has not expressed an interest in contributing funding to a program to earn
pollution credits. Under the current program, the state would use average emission
estimates developed by the EPA for certain model years to evaluate the amount of a
pollution credit, but the state is developing a new AVR program to replace the current
one. The new program will provide revised procedures for identifying the most polluting
vehicles and new methods for measuring the emissions reduced by scrapping each vehicle,
instead of depending on EPA estimates.
Virginia.14 In early 1996, the state passed a law to authorize the Virginia
Department of Environmental Quality to participate in an AVR program with private
industry to award pollution credits, but private corporations have yet to express an interest
in sponsoring a program. The state would not provide funding for a program and would
not regulate how the program would function. The state only would evaluate the level of
emissions that are reduced from scrapping each vehicle to determine the amount of the
pollution credit. The new law also includes provisions that address the interests of
automobile collectors and the local automobile repair industry by requiring a sponsoring
corporation to notify the public before scrapping vehicles that are collectible or that have
parts for which there is a small supply. The public has up to 20 days to purchase either the
entire vehicle or selected parts before the vehicle would be scrapped.
Conclusion
A few states have experimented with AVR programs on a small scale, but whether
such programs would improve air quality on a large scale in other states is uncertain.
AVR programs are potentially more effective in states with large metropolitan areas where
automobile exhaust contributes significantly to air pollution and in states with heavy
industry where there is a demand for pollution credits earned from funding a program.
Texas and Virginia have developed AVR programs but not implemented them due to a
lack of interest among local industry in sponsoring such programs. California and Illinois
are planning to operate AVR programs over large areas of their states, but whether these
programs will attract a sufficient number of vehicles to achieve air quality goals is
unpredictable. If either of these programs retires as many vehicles as projected, they may
encounter controversy from interests that oppose scrapping vehicles. The future of AVR
programs will depend on whether private industry will seek to sponsor such programs to
12 Telephone interview with Gale Newton, Illinois Environmental Protection Agency.
13 Telephone interview with Ruth Rieman, Texas Natural Resource Conservation
Commission.
14 Telephone interview with Jim Sydnor, Virginia Department of Environmental Quality.

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earn pollution credits and whether less controversial or more cost-effective options are
available to states to achieve or maintain federal air quality standards.