Subsidizing Replacement of Motor Vehicles: An Analysis of “Cash for Clunkers” Programs

Subsidizing Replacement of Motor Vehicles: An Analysis of “Cash for Clunkers” Programs

Subsidizing Replacement of Motor Vehicles:
September 25, 2020
An Analysis of “Cash for Clunkers” Programs
Bill Canis
Some Members of Congress have suggested developing a rebate program either to address effects
Specialist in Industrial
of the 2020 pandemic on the automotive industry, including the temporary closures of all U.S.
Organization and Business
vehicle manufacturing plants, or as part of a long-range effort to remove older internal-

combustion vehicles with high greenhouse gas emissions from the roads. Rebates were offered
previously under the Consumer Assistance to Recycle and Save (CARS) program, also known as

“Cash for Clunkers,” established in the Supplemental Appropriations Act, 2009 (P.L. 111-32), as
well as under programs created by several states and foreign countries.
Congress enacted the CARS program in the depths of the 2007-2009 recession to spur the domestic auto industry, preserve
manufacturing jobs, and improve the fuel economy of vehicles on the road.
The program was very popular: within six weeks of authorizing a $1 billion outlay, Congress appropriated an additional $2
billion for rebates. Consumers who traded in older model vehicles and purchased new cars with higher fuel economy
received cash rebates on the spot. More than 677,000 rebates were processed, prompting the National Highway Traffic Safety
Administration (NHTSA), which administered the CARS program, to report shortly after the program ended that it increased
U.S. GDP by a range of $3.8 billion to $6.8 billion; created or saved 60,000 jobs; reduced fuel consumption by 33 million
gallons annually; and decreased emissions of carbon dioxide and related greenhouse gases by 9 million metric tons over 25
years. The CARS legislation included no requirements limiting rebates to vehicles produced in the United States or in North
America; NHTSA found afterward that 49% of the rebates were used for U.S.-produced vehicles.
Subsequent studies by economists offered estimates of the program’s effects on vehicle s ales and production, employment,
and GDP that were more modest. Estimates of incremental vehicle sales prompted by CARS rebates vary from 125,000 to
over 500,000, depending on how many of the sales are assumed to have been pulled forward from later in 2009 or 2010.
Estimates of the number of jobs preserved or created range from 3,600 to 40,000, and a study by economists at the Federal
Reserve Bank of New York concluded that GDP gains attributable to CARS were “negligible.” Studies generally agreed that
CARS achieved one of its main objectives of improving fuel efficiency, but at a relatively high cost per gallon of fuel saved
or ton of greenhouse gas emissions avoided. Some found that sales of more fuel-efficient vehicles dropped after the program
ended.
The enacting legislation gave NHTSA 30 days to issue regulations and begin implementation of CARS, a timeline that
caused administrative problems and eventually led to the hiring of 7,000 short -term contractors to keep up with the
reimbursements to auto dealers. In addition, the Department of Transportation (DOT) Inspector General later identified issues
with data collection and limitations of an information technology system that was not prepared for the volume of
transactions.
Among the rebate programs offered in other countries, those in Japan and Germany recorded the highest transactions: 2.8
million and 1.9 million more efficient vehicles, respectively. After the CARS program ended, several states implemented
similar programs focused on improving emissions of passenger car and truck fleets. The experience of two current California
programs, where rebates are used to accelerate the replacement of older vehicles, may be informative should Congress seek
to implement a vehicle rebate program again. The passenger car program offers rebates of up to $7,000 for the purchase of
new, zero-emission and hybrid electric vehicles; no trade-in of an older vehicle is required, and benefits are targeted to lower-
income residents. More than 350,000 consumers have received rebates since 2010. The truck program seeks to replace diesel-
powered trucks servicing the ports of Los Angeles and Long Beach with natural gas and electric trucks by 2035.
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Contents
Introduction ................................................................................................................... 1
CARS Program of 2009 ................................................................................................... 2
Observations About the 2009 CARS Act............................................................................. 3
Short-Term Sales Gains .............................................................................................. 4
Limited Effects on Production ..................................................................................... 5
Employment Effects Disputed ..................................................................................... 7
Fuel Economy Was the Main Environmental Goal .......................................................... 7
Eligibility Standards and Purchaser Profile .................................................................... 8
Unusually Brief 30-Day Implementation Time Frame Led to Administrative Issues ............. 9
Mixed Results on Program Metrics............................................................................. 10
World Trade Rules Affected the Program Design and Results ......................................... 12
Programs in Major Foreign Markets Differed .................................................................... 13
Beyond CARS: Vehicle Rebate Programs in California ....................................................... 15

Figures
Figure 1. U.S. Light Vehicle Sales ..................................................................................... 4
Figure 2. U.S. Monthly Light Vehicle Production 2008-2010 ................................................. 6

Tables
Table 1. U.S. Light Vehicle Production and Sales ................................................................. 1
Table 2. 2009 CARS Program Rebates and Criteria .............................................................. 2
Table 3. Country of Origin of New Vehicles in CARS Program ............................................ 13
Table 4. Fleet Modernization Programs in Selected Countries .............................................. 14

Appendixes
Appendix. For Additional Reading................................................................................... 17

Contacts
Author Information ....................................................................................................... 18

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Introduction
The recession and financial crisis of 2007-2009 led to sharp drops in light-vehicle production in
many countries. In the United States, annual domestic production of cars and light trucks fel by
47% from 2007 to 2009, and sales dropped by 36% (Table 1). Production declines of similar
magnitudes occurred over different time periods in Canada, Japan, Germany, France, and other
countries.1 In a number of countries, governments undertook emergency measures to assist their
domestic auto industries.2
Table 1. U.S. Light Vehicle Production and Sales
2007-2009
Year
Production
Sales

In millions of vehicles
2009
5.6
10.6
2008
8.5
13.5
2007
10.5
16.5
Percent Change,
-47%
-36%
2007-2009
Source: Ward’s Database.
Note: Light vehicles include passenger cars, sport utility vehicles (SUVs), and pickup trucks.
One widely used approach provided rebates to individuals who agreed to scrap an old, highly
polluting vehicle in conjunction with the purchase of a new one. Congress enacted legislation to
authorize such a program, general y known as “cash for clunkers,” in the Consumer Assistance to
Recycle and Save (CARS) Act,3 passed in 2009.
Some Members of Congress have suggested developing a similar rebate program either to address
effects of the 2020 pandemic, including the temporary closures of al U.S. vehicle manufacturing
plants, or as part of a long-range environmental plan to remove from the roads older vehicles with
internal combustion engines that produce high greenhouse gas emissions. This report summarizes
the 2009 rebate program, discusses studies analyzing the effects of the program, and considers
issues stemming from CARS enactment and implementation similar programs under way in
California. Summary information about vehicle-replacement programs in other countries is
provided in Table 4.

1 Organization for Economic Co-operation and Development, “Recent Developments in the Automobile Industry,”
OECD Econom ics Policy Departm ent Policy Notes, No. 7 (2011).
2 In the United States, federal support included utilization of the T roubled Asset Relief Program (T ARP), established in
the Emergency Economic Stabilization Act of 2008 (P.L. 110-343) during the George W. Bush and Obama
Administrations to make loans to General Motors, Chrysler, and their auto financing companies; a new grant program
to spur investment in electric vehicle and batt ery manufacturing in the American Recovery and Reinvestment Act of
2009 (P.L. 111-5); and the Advanced T echnology Vehicles Manufacturing program at the Department of Energy,
which provided Ford Motor Company, Nissan, T esla, and other companies with loans for making more fuel -efficient
vehicles.
3 T he initial CARS program was T itle XIII of the Supplemental Appropriations Act, 2009 ( P.L. 111-32),
https://www.congress.gov/111/crpt/hrpt151/CRPT-111hrpt151.pdf.
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CARS Program of 2009
The CARS program provided rebates toward the purchase of new fuel-efficient vehicles. To
receive a rebate, a consumer had to trade in an older vehicle that was to be scrapped by the auto
dealer; the consumer could not receive a rebate to buy a new vehicle without an eligible trade-in
vehicle.
The National Highway Traffic Safety Administration (NHTSA) in the Department of
Transportation (DOT) was given responsibility for issuing regulations within 30 days of
enactment and for implementing the program. President Obama signed the legislation providing
$1 bil ion for the rebate program on June 24, 2009. NHTSA issued final rules governing the
eligibility requirements, payment procedures, and other program details on July 23, 2009, and
began accepting automobile dealer reimbursement requests on July 27. Consumers could take
advantage of the program even before NHTSA’s rules went into effect, as the CARS Act
permitted reimbursements for cars purchased between July 1 and the program expiration on
November 1, 2009. When the program proved popular and the available funding ran low after a
week, Congress quickly enacted an additional $2 bil ion.4
The CARS Act established two categories of rebates, depending on the fuel efficiency
improvement resulting from each sale (Table 2). When a transaction satisfied the eligibility
criteria, the purchaser received an immediate, on-the-spot rebate from the dealer, who was later
reimbursed by NHTSA.
Table 2. 2009 CARS Program Rebates and Criteria
Rebate
Required Fuel Economy of Vehicle Purchased

Passenger Cars
Category 1 Truck
Category 2 Truck Category 3 Truck
$4,500
At least 10 mpg
At least 5 mpg
At least 2 mpg
Not eligible
higher than
higher than
higher than
scrapped vehicle
scrapped vehicle
scrapped vehicle
and at least 22 mpg
and at least 18 mpg
and at least 15 mpg
$3,500
At least 4 mpg
At least 2 mpg
At least 1 mpg
Truck to be
higher than
higher than
higher than
scrapped was an
scrapped vehicle
scrapped vehicle
scrapped vehicle
MY2001 or older
and at least 22 mpg
and at least 18 mpg
and at least 15 mpg
model and of similar
size to or larger
than the new
vehicle
Source: NHTSA, CARS Program: Most Transactions Met Program Requirements, But Program Completion Activities
Continue, MH-2010-054, April 29, 2010, https://www.oig.dot.gov/sites/default/files/
CARS%20FINAL%204.29.10%20508.pdf.
Notes: Category 1 includes SUVs, smal er vans, and pickup trucks. Category 2 includes larger light-duty pickup
trucks and vans. Category 3 includes medium-duty pickup trucks. MPG=miles per gal on, based on EPA’s
combined city/highway rating. MY=model year.

4 T he additional funding for the CARS program, H.R. 3435, was introduced on July 31, 2009, and signed into law on
August 7, 2009 (P.L. 111-47). The rebate program would have ended without the additional appropriation.
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Subsidizing Replacement of Motor Vehicles: An Analysis of “Cash for Clunkers” Programs

Several states also implemented variations of vehicle rebate programs during the recession,
including California and Texas. These programs gave rebates to eligible purchasers in addition to
those provided under the CARS Act.5
Observations About the 2009 CARS Act
Analyses of the CARS program’s efficacy in meeting its objectives differ. The primary legislative
objectives of the CARS program were to stimulate the economy during the recession and promote
sales of new, more fuel-efficient vehicles.6 NHTSA’s report to Congress7 following the program’s
conclusion stated that these objectives were met. It stated that “the nation’s economy benefited
immediately from this stimulus program, which caused a distinct upward movement in GDP and
created or saved tens of thousands of jobs.”8 According to NHTSA, the program resulted in
 the sale of more than 677,000 new vehicles, including 401,274 passenger cars,
274,602 light trucks, and 1,966 medium-duty trucks, with 346,000 of those sales
pulled forward from later in 2009 and 2010;9
 improved fuel economy, with an average combined Environmental Protection
Agency (EPA) rating for the new vehicles of 24.9 miles per gal on compared to
an average rating of 15.8 miles per gal on for traded-in vehicles;
 an increase in 2009 GDP by a range of $3.8 bil ion to $6.8 bil ion;10
 60,000 jobs created or saved;
 an annual reduction of 33 mil ion gal ons of fuel consumed; and
 a reduction in emissions of carbon dioxide and related greenhouse gases of 9
mil ion metric tons over 25 years.11
In a voluntary consumer survey12 that NHTSA conducted of purchasers throughout the CARS
program, 20% of respondents indicated they were planning to buy a new car in the following six
months; NHTSA assumed in its analysis that vehicle sales through CARS would encourage
purchasers who otherwise would have waited up to two years to buy new vehicles.13

5 David Herszenhorn and Clifford Krauss, “Enthusiasm Builds for Helping Shift to Fuel-Efficient Cars,” New York
Tim es, March 30, 2009, at https://www.nytimes.com/2009/03/31/business/31clunkers.html.
6 NHT SA, CARS Program: Most Transactions Met Program Requirements, But Program Completion Activities
Continue, MH-2010-054, April 29, 2010, p. 1.
7 Section 1302(g) of the original CARS statute required NHT SA to report the program results to Congress within 60
days of the end of the program.
8 NHT SA, Consumer Assistance to Recycle and Save Act of 2009, December 2009, p. 2, at https://web.archive.org/web/
20100808074852/http://www.cars.gov/files/official-information/CARS-Report -to-Congress.pdf.
9 Ibid., p. 36.
10 According to U.S. Bureau of Economic Analysis, National Income and Product Accounts, T able 1.1.5, nominal
Gross Domestic Product in 2009 was $14.4 trillion. T he NHT SA estimate therefore implies that CARS increased GDP
by well below one-tenth of 1%.
11 Ibid., p. 2.
12 T he official title was the “Survey of Consumer Response to CARS Initiative.” Ibid., Appendix A.
13 Ibid., p. 36.
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Short-Term Sales Gains
Later studies by independent organizations had access to more complete data than that used by
NHTSA, which was required to submit a report to Congress soon after the CARS program ended.
Many studies disagreed with NHTSA’s analysis or found that the Cash for Clunkers program led
to significantly fewer new-vehicle sales than NHTSA estimated.
In late 2008 and 2009, light-vehicle sales deteriorated, with January and February 2009 sales of
wel under 700,000 units per month, compared with sales of over 1.2 mil ion vehicles a month the
same period in 2008. However, sales began to rise in March 2009, and in May more than 900,000
new vehicles were sold (Figure 1), ironical y just as General Motors and Chrysler filed for
bankruptcy.14 In July, as the CARS program took effect, sales hit nearly 1 mil ion units, and in
August, 1.3 mil ion vehicles were sold, the high point for the year. Sales retreated in September,
October, and November, however, not returning to a mil ion vehicles until December.15
Figure 1. U.S. Light Vehicle Sales
Monthly data, 2009

Source: Ward’s Database.
Note: Light vehicles include passenger cars, SUVs, and pickup trucks.
Economists Adam Copeland and James Kahn of the Federal Reserve Bank of New York found
that the “CARS program had only a transitory cumulative effect on sales.” While the authors
estimated that it may have spurred 450,000 vehicle sales, they found that they were mostly shifted
from the fourth quarter of 2009 into the third quarter. The authors concluded “that by January
2010, the cumulative effect of the CARS program on auto sales was essential y zero.”16

14 Chrysler filed for bankruptcy on April 30, 2009; General Motors on June 1, 2009. New companies exited the
bankruptcy court in July 2009.
15 January and February 2010 light vehicle sales dropped (to 696,000 and 778,000 units per month, respectively). It was
not until March 2010 that a more sustained recovery in vehicle sales was reached (1.1 million units), with near 1
million for almost every subsequent month of that year. Ward’s Database, 2010 Light Vehicle Sales.
16 Adam Copeland and James Kahn, The Production Impact of “Cash for Clunkers”: Implications for Stabilization
Policy, Federal Reserve Bank of New York, Staff Report no. 503, July 20 11, https://www.newyorkfed.org/
medialibrary/media/research/staff_reports/sr503.html.273.
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Economists Atif Mian, then at the University of California, Berkeley, and Amir Sufi of the
University of Chicago reached similar conclusions, estimating that CARS stimulated the sale of
an additional 360,000 vehicles, mostly pulled forward from following months, with the salutary
effect of CARS “almost completely reversed by as early as March 2010.”17
The Government Accountability Office (GAO) issued a report in April 2010, based on interviews
with a cross section of industry and government officials and a review of studies by industry
experts and academics. With regard to boosting sales, GAO identified limitations in the NHTSA
survey of CARS purchasers and noted that “a portion of the sales would have likely occurred
even if the program had not been implemented.”18 GAO evaluated other studies’ estimates of the
incremental vehicle sales that occurred because of the program, which ranged from 542,00019
down to 125,000.20 GAO also cited an estimate by the President’s Council of Economic Advisers
(CEA)21 that 64% (440,000) were incremental. A separate study by the Center for Automotive
Research, a Michigan nonprofit research organization supported by some major automakers,
estimated 395,000 incremental sales were enabled by the program.22
Although its overal effect on vehicle sales seems to have been relatively smal , in the range of
3% of the 16 mil ion light vehicles sold in 2007, the timing of the sales attributable to the CARS
program may have been important to auto dealers. Many auto dealers were struggling in the
summer of 2009, when Cash for Clunkers seems to have had its greatest effect on sales. In the
absence of the CARS program, it is possible that some of them might have not remained solvent
into the fourth quarter of 2009.23
Limited Effects on Production
Subsequent to the end of the CARS program, the Business Cycle Dating Committee of the
National Bureau of Economic Research determined that the U.S. recession that began in
December 2007 ended in June 2009, just before the program took effect. At the time of
enactment, Congress could not have known that the worst of the downturn was past, and
stimulating a major manufacturing industry and preserving factory jobs were among its main
goals.
The New York Fed study gave particular attention to this effect of CARS, arguing that “the
program had a very modest and short-lived effect on production,” shifting about 100,000 units
from late 2009 and early 2010 into the third quarter of 2009.24 The vehicle production pattern

17 Atif Mian and Amir Sufi, “ T he Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for Clunkers’ Program,”
Quarterly Journal of Econom ics, Vol. 127, No. 3 (2012), at https://academic.oup.com/qje/article-abstract/127/3/1107/
1924374?redirectedFrom=fulltext.
18 U.S. Government Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010,
p. 13, at https://www.gao.gov/assets/310/303722.pdf.
19 Study by Maritz Automotive Research Group cited in GAO report. Ibid., p. 15.
20 Study by Edmunds.com cited in GAO report. Ibid., p. 14.
21 Council of Economic Advisers, Economic Analysis of the Car Allowance Rebate System , September 10, 2009, p. 4, at
https://permanent.fdlp.gov/lps119620/LPS119620.pdf.
22 Adam Cooper, Yen Chen, and Sean McAlinden, The Economic and Fiscal Contributions of the “Cash for Clunkers”
Program —National and State Effects, Center for Automotive Research, January 14, 2010, p. 1, at
https://www.cargroup.org/wp-content/uploads/2017/02/T he-Economic-and-Fiscal-Contributions-of-the-Cash-for-
Clunkers-Program_National-and-State-Effect.pdf.
23 Adam Copeland and James Kahn, The Production Impact of “Cash for Clunkers”: Implications for Stabilization
Policy, Federal Reserve Bank of New York, Staff Report no. 503, July 2011, p. 18.
24 Ibid., p. 2.
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during the summer months of this period (2008-2010) was similar each year (Figure 2). The
spike in 2009 CARS-related vehicle sales did not change the general summer season production
pattern, but it appears to have boosted the lagging production of the first six months of 2009 into
normal territory.25
The decline in vehicle sales during the recession resulted in larger inventories on dealers’ lots
from mid-2008 to early 2009. The New York Fed found that these inventories dropped during
spring 2009 and had returned to a normal level by June 2009; the CARS program further reduced
inventories to the lowest level in more than a decade, relative to sales.26 Automakers traditional y
shift production from one model year to the next over the summer; that was the case in 2009, so
dealer inventories27 at the time CARS took effect were mainly 2009 vehicles. As a result, more
than 75% of CARS rebates were for such vehicles.28 The inventory of new model year 2010
vehicles was low during the summer of 2009, as the model year commenced only in September,
so relatively few 2010 models were sold during CARS, most from new production.29
Figure 2. U.S. Monthly Light Vehicle Production 2008-2010

Source: Ward’s Database.
Note: Light vehicles include passenger cars, SUVs, and pickup trucks.
The output of the automotive sector is an important contributor to GDP. GAO found that CARS
helped stimulate the economy, but “the extent of the program’s simulative effect on the economy
is uncertain.”30 It pointed out two limitations in assessing an accurate GDP impact: a lack of
consensus on how many incremental sales were made and ambiguity about whether those sales
resulted in new manufacturing activity or only reduced inventory of vehicles already on dealers’

25 August 2009 production was 167,000 units higher than July 2009.
26 Adam Copeland and James Kahn, The Production Impact of “Cash for Clunkers”: Implications for Stabilization
Policy, Federal Reserve Bank of New York, Staff Report no. 503, July 2011, p. 7.
27 Auto dealers normally maintain at least a two-month inventory of new vehicles on their lots.
28 Adam Copeland and James Kahn, The Production Impact of “Cash for Clunkers”: Implications for Stabilization
Policy, Federal Reserve Bank of New York, Staff Report no. 503, July 2011, p. 6.
29 Ibid.
30 U.S. Government Accountability Office, Lessons Learned from Cash for Clunkers Program, AO-10-486, April 2010,
p. 12, at https://www.gao.gov/assets/310/303722.pdf.
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lots.31 The New York Fed report reached a similar conclusion, saying CARS had a “negligible
direct effect on GDP,” shifting some GDP from late 2009 and early 2010 into the third quarter of
2009.32
Employment Effects Disputed
Employment gains from CARS were hard to substantiate because of lack of consensus on the
number of sales attributable to the program and its effect on vehicle manufacturing. GAO pointed
out that estimates of job creation by NHTSA and CEA were based on different methodologies for
estimating how many vehicles an average autoworker could produce per year tied to estimates of
incremental sales. Because the CARS program was temporary, GAO noted, “the permanency of
any employment impact is more difficult to gauge”; in addition, it pointed out that “CEA
acknowledged that its employment impact estimates were more uncertain than its Gross Domestic
Product estimates.” 33 Higher vehicle sales by themselves do not mean that GDP and employment
are also higher when large inventories absorb the sales instead of spurring new production. Other
studies came to very different conclusions about employment using different econometric models:
 A review of CARS analyses by three economists at the Brookings Institution
reported that the program was estimated to have added 3,676 jobs in vehicle parts
and assembly in the second half of 2009, at a cost of $1.4 mil ion per job
created.34
 The Center for Automotive Research reported that over 40,000 jobs were created,
estimating a government subsidization rate of $71,000 per new job. The authors
stated that CARS was more efficient than stabilization programs enacted as part
of the American Recovery and Reinvestment Act of 2009, with a subsidization
rate of $92,000 per new job, cal ing CARS “one of the most successful economic
stimulus plans in 2009.”35
Fuel Economy Was the Main Environmental Goal
There is general agreement among studies evaluating the CARS program that it achieved its
objective of putting more fuel-efficient vehicles on the road. However, the effect may have been
overestimated by NHTSA. CARS capped the manufacturer’s suggested retail price of purchased
vehicles at $45,000, and some consumers might have purchased vehicles with even higher fuel
efficiency priced above the cap in the absence of the rebate program. One study compared the
fuel economy of vehicles purchased in the CARS program with the average fuel economy of
model year 2009 vehicles and found that CARS purchases increased average fuel economy of al

31 GAO’s interviews with major automakers showed that six of eight companies reported that CARS lowered vehicle
inventories, while nearly the same number of companies said the program increased production. Ibid., pp. 16 and 23.
32 Adam Copeland and James Kahn, The Production Impact of “Cash for Clunkers,” p. 2.
33 U.S. Government Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010,
p. 17.
34 T he CARS program was compared to other stimulus programs such as increasing unemployment assistance and
reducing payroll taxes, concluding that it was less effective at creating jobs than the others they evaluated. T ed Gayer,
Emily Parker, and Karen Dynan, Cash for Clunkers: An Evaluation of the Car Allowance Rebate System , Brookings
Institution, October 30, 2013, at https://www.brookings.edu/research/cash-for-clunkers-an-evaluation-of-the-car-
allowance-rebate-system.
35 Adam Cooper, Yen Chen, and Sean McAlinden, The Economic and Fiscal Contributions of the “Cash for Clunkers”
Program —National and State Effects, Center for Automotive Research, January 14, 2010, pp. 1, 6, and 13.
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model year 2009 vehicles sold by 0.1 miles per gal on.36 Reducing emissions from motor vehicles
was another CARS goal, but there were no goals for reduction of specific pollutants.
NHTSA’s analysis did not include a broader life-cycle evaluation that would have considered
energy consumption and greenhouse gas emissions generated by disposal (through scrappage) of
the older vehicles that were traded in and in manufacturing new vehicles. GAO’s review led it to
conclude that consideration of those factors “may offset some of the program’s effect on emission
reductions.”37
The CARS program’s emphasis on fuel economy—with a larger rebate for purchasing a more
fuel-efficient vehicle and no rebate for purchasing some types of vehicles with low fuel
economy—was found by some studies to have shifted consumer demand to more fuel-efficient
vehicles and away from ineligible vehicles.38 The authors of a report by Resources for the Future,
an environmental research organization, concluded that the increase in sales of more fuel-efficient
vehicles during CARS was offset at least partial y in later months, when sales of such vehicles
were reduced. They also reached this conclusion about the CARS program: “[I]f the program
were to be judged as an environmental program, the implied costs of reducing gasoline
consumption and CO2 emissions are quite high: the best-case scenario suggests a cost of over $91
in government expenditures for each ton of CO2 avoided and almost 90 cents for each gal on of
reduced gasoline consumption.”39
Eligibility Standards and Purchaser Profile
The CARS program did not have income eligibility requirements. The study by Brookings
Institution economists estimated that those car buyers most likely to have participated “had a
median-before tax income of about $69,000”40 and “a higher before-tax income, were older, more
likely to own a home, and more likely to have a high-school and a college degree.”41 Participation
was across the country and “reflected the U.S. population distribution.”42 Some state rebate
programs included both income limits and lower vehicle price eligibility standards.43

36 T he average fuel economy of CARS purchases was 23.8 miles per gallon (mpg); the average miles per gallon for all
model year 2009 vehicles was 21.4 mpg. T he authors noted that the difference of 2.4 mpg amounted to a 0.1 mpg fuel
economy improvement for all vehicles sold that year. Ben Foster and T herese Langer, Cash for Clunkers: A Missed
Opportunity for Fuel Econom y Gains, American Council for an Energy-Efficient Economy, Report Number T 112,
September 2011, p. 6, at https://www.aceee.org/sites/default/files/publications/researchreports/t112.pdf.
37 U.S. Government Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010,
p. 19.
38 Shanjun Li, Joshua Linn, and Eisheba Spiller, Evaluating “Cash for Clunkers”: Program Effects on Auto Sales and
the Environm ent, Resources for the Future, October 2011, p. 5, at https://media.rff.org/archive/files/sharepoint/
WorkImages/Download/RFF-DP-10-39-REV.pdf.
39 Ibid., p. 23.
40 Real median household income in the United States was $50, 221 in 20 09. Amanda Noss, Household Income for
States: 2008 and 2009, U.S Census Bureau, American Community Survey Briefs, ACSBR/09 -2, September 2010, at
https://www.census.gov/library/publications/2010/acs/acsbr09-2.html.
41 T ed Gayer, Emily Parker, and Karen Dynan, Cash for Clunkers: An Evaluation of the Car Allowance Rebate System ,
Brookings Institution, October 30, 2013, pp. 9-10.
42 U.S. Government Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010,
p. 20.
43 For example, the T exas Drive a Clean Machine rebate program capped the sale price of new vehicles at $25,000 and
limited participation to lower-income purchasers. In the T exas program, a purchaser in a household with four people
would have been eligible t o receive a rebate only if the household’s income was no more than $66,000 in 2009. U.S.
Government Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010, p. 29.
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Many of the CARS purchasers would have purchased a new vehicle even without CARS,
according to some studies; one study estimated that as many as 60% of the consumers who
bought vehicles with CARS rebates would have bought them without the rebate.44 In addition, the
authors found that many consumers bought lower-priced vehicles than what they would have
bought without CARS. The fuel efficiency restrictions of the program “induced households to
buy smal er and less expensive vehicles,” ironical y lowering total new-vehicle spending by
$5,000 per subsidy.45
One concern raised in 2009 was that destruction of large numbers of used vehicles might reduce
the number of used cars available for lower-income consumers, driving up their prices. Several
studies concluded that this was not an outcome of the CARS program because (1) the scrapping
of nearly 700,000 vehicles represented a smal change in the universe of potential used cars,
given the more than 250 mil ion light vehicles in use in the United States; and (2) the average age
of vehicles traded in during CARS was 16 years, so the interaction between new-car sales and
CARS trade-in vehicles was “minimal.”46
Unusually Brief 30-Day Implementation Time Frame Led to
Administrative Issues
Despite the popularity of rebate programs in Europe that preceded the U.S. CARS program and
surveys by the National Automobile Dealers Association that found that $1 bil ion would be
committed in less than a week,47 the strong public response was not anticipated. The enacting
legislation gave NHTSA 30 days to develop the regulations, publicize the program, develop a
website to inform potential vehicle purchasers, and set up the internal systems to process dealer
reimbursements.48 The volume of transactions rose quickly. According to NHTSA, demand for
rebates “outstripp[ed] the transaction review capacity NHTSA had created to deal with the much
lower volume envisioned by the original legislation.”49 As the program administration chal enges
continued, NHTSA added more than 7,000 people by September—mostly short-term
contractors—to process dealer reimbursements.

44 Mark Hoekstra, Steven Puller, and Jeremy West, Cash for Corollas: When Stimulus Reduces Spending, American
Economic Journal: Applied Economics, Vol. 9, No. 3, July 2017, at https://www.aeaweb.org/articles?id=10.1257/
app.20150172.
45 Ibid.
46 Adam Copeland and James Kahn, The Production Impact of “Cash for Clunkers”: Implications for Stabilization
Policy, Federal Reserve Bank of New York, Staff Report no. 503, July 2011, p. 16, and Meghan Busse, Christopher
Knittel, and Jorge Silva-Risso et al., Did “Cash for Clunkers” Deliver? The Consum er Effects of the Car Allowance
rebate System , MIT Center for Energy and Environmental Policy Research, CEEPR WP 2 -13-009, November 2012, p.
3, at http://ceepr.mit.edu/files/papers/2013-009.pdf.
47 Ryan Beene, “NADA rushed to make cash for clunkers work,” January 22, 2017, at https://www.autonews.com/
article/20170122/NADA100/301239945/nada-rushed-to-make-cash-for-clunkers-work.
48 GAO auditors found that DOT officials told them they had limited time to develop the surv ey and that the Office of
Management and Budget (OMB) approved abbreviated survey design and implementation. U.S. Government
Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010, p. 30.
49 NHT SA, Consumer Assistance to Recycle and Save Act of 2009, December 2009, p. 1.
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A key part of the CARS program was the NHTSA survey of consumers who purchased vehicles
with CARS rebates. The survey was developed in a short period of time—with no pretesting
beforehand—leading GAO to later comment that “it did not follow some general y accepted
survey design and implementation practices, thereby posing potential risk to the reliability of the
agency’s survey-based estimate of reduced fuel consumption.”50 Because not al CARS
purchasers were required to complete the survey, the CARS survey had a response rate of 27%,
instead of the expected 75%; when incomplete, duplicate, and invalid surveys were factored in,
the response rate was reduced to 21%. In addition, NHTSA did not follow up with
nonrespondents to increase the response rate, a procedure recommended by Office of
Management and Budget guidelines. In response to GAO’s finding, NHTSA asserted that the
tight schedule for making its CARS report to Congress—another deadline mandated in the
enacting legislation—made such follow-up “impractical.”51
The congressional recess timetable also had a potential impact on program expectations. As
interest surged during its first week in late July—shortly before a planned early August
congressional recess—the disbursement of the initial appropriation led dealers to be concerned
that they could be left with mil ions of dollars of discounts paid out to consumers, with no chance
of reimbursement until fal when Congress returned and no assurance that Congress would then
appropriate additional funds.52 Dealers faced a potential choice of refusing CARS-related rebates
just as consumers were taking an interest or providing rebates for which they might not receive
reimbursement.
Mixed Results on Program Metrics
The statute establishing CARS required both GAO and the DOT Office of Inspector General
(OIG) evaluations after the program terminated.53 The OIG report, issued in April 2010,
examined NHTSA’s controls to ensure CARS met federal requirements and discussed chal enges
NHTSA faced during implementation and program closing. The OIG reported that 97% of CARS
transactions met basic eligibility requirements pertaining to mandated fuel efficiency and
ownership requirements because NHTSA established “transaction controls, including a two-level
manual review and approval of each payment and automated checks to prevent duplicate
payments,” and “required dealers to certify that they would disable trade-in vehicle engines to
prevent resale.”54
The OIG found chal enges to implementation of the CARS program, including the following:
 Accurate disposal information. NHTSA’s main controls to ensure that traded-in
vehicles were disposed of correctly initial y utilized the Department of Justice’s
National Motor Vehicle Title Information System (NMVTIS),55 which only 15

50 U.S. Government Accountability Office, Lessons Learned from Cash for Clunkers Program , AO-10-486, April 2010,
p. 18.
51 Ibid., p. 35.
52 Ryan Beene, “NADA rushed to make cash for clunkers work,” January 22, 2017.
53 GAO’s observations are included in the previous section of this report, generally tied to the legislatively mandated
timetable for issuing regulations and informing Congress of the program results.
54 Joseph Comé, Assistant Inspector General for Surface and Maritime Program Audits, DOT Office of the Inspector
General, Consumer Assistance to Recycle and Save Program: Most T ransactions Met Program Requirements, But
Program Completion Activities Continue, MH-2010-054, April 29, 2010, p. 2, at https://www.oig.dot.gov/sites/default/
files/CARS%20FINAL%204.29.10%20508.pdf.
55 NMVT IS was established to assist motor vehicle administrators, law enforcement officials, and consumers with an
electronic means to verify vehicle title and other data, primarily to prevent vehicle theft and fraud.
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states fully used in 2009. To compensate, NHTSA developed work-around
procedures so consumers could determine titling and avoid purchasing used
vehicles that were supposed to have been scrapped. Nevertheless, the OIG found
that some disposal facilities did not comply with vehicle trade-in rules, thus
limiting NHTSA’s ability to confirm that vehicles were crushed or shredded
within 270 days of trade-in.
 Inadequate transaction controls. NHTSA used a contractor to estimate future
dealer requests for payment, based on surveys of vehicle sales. This data lagged
substantial y, however, and when its first report was made to NHTSA, dealers
had completed $1.38 bil ion in CARS transactions, $380 mil ion over the then-
appropriated amount. Had Congress not added $2 bil ion to the program,
“NHTSA risked having to deny an estimated $380 mil ion in potential y eligible
claims.”56

OIG also noted that NHTSA did not validate Vehicle Identification Numbers
(VINs) before paying dealers, and did not encrypt personal y identifiable
information stored in the CARS database.
 Underestimated demand. NHTSA assumed dealer requests for payment would
be a steady 3,000 per day, but then received 224,000 requests in the first 10 days.
The CARS statute set the eligibility period for rebates starting on July 1, 2009,
nearly a month before NHTSA had the program regulations in place, resulting in
a backlog of 51,000 transactions on the first day of program reimbursements.
NHTSA was behind before it even started processing rebates.

The contractor hired to make payments to dealers was Citibank, but the surge in
CARS transactions overwhelmed its ability to handle dealer transactions, so
NHTSA resorted to emergency contracting to supplement the Citibank
operations. The temporary workforce used 7,000 federal employees from the
Federal Aviation Administration, other DOT agencies, and the Internal Revenue
Service.
 Overestimated compliance. NHTSA assumed most payment requests would
have al the correct data, but most were rejected because they were incomplete,
requiring dealers to resubmit them and delaying payments to dealers.
 Information technology (IT) system weaknesses. The high volume exposed IT
weaknesses that had not been anticipated. NHTSA did not have time to conduct
risk assessments dealing with software needs and system testing. The OIG stated
that should future programs like CARS be developed, NHTSA should have in
place design guidelines “that incorporate risk mitigation and contingency plans
for transaction processing, IT systems, and activity monitoring and reporting.”57

56 Joseph Comé, Assistant Inspector General for Surface and Maritime Program Audits, DOT Office of the Inspector
General, Consum er Assistance to Recycle and Save Program : Most Transactions Met Program Requirem ents, But
Program Com pletion Activities Continue, MH-2010-054, April 29, 2010, p. 6.
57 Ibid., p. 17.
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World Trade Rules Affected the Program Design and Results
Among the legislative proposals in 2009 to establish a rebate system were two bil s that addressed
the manufacturing location of the vehicle being purchased. H.R. 1550, introduced by
Representative Sutton, would have limited rebates to vehicles produced in either the United States
or North America (Section 3(b)). S. 247, introduced by Senator Feinstein, would have permitted
rebates for vehicles regardless of their country of origin. The provision limiting rebates by
country of origin became controversial as the House debated the first rebate legislation, amid
concerns that restricting rebates to U.S.-made vehicles could violate U.S. commitments to the
World Trade Organization, provoking chal enges from European and Asian countries and
delaying implementation of the rebate system.58 The European Union ambassador to the United
States reportedly wrote to members of Congress al eging that the legislation introduced by
Representative Sutton would violate international agreements.59 The bill providing $4 bil ion for
rebates that passed the House on June 9, 2009 (H.R. 2751), did not include a country-of-origin
limitation.
In discussing the legislation when it was debated in the House, Representative Sutton stated,
“And though our fleet modernization program is open to vehicles, regardless of where they are
made, I encourage everyone who participates in this program to think about the families who
depend upon cars made in the United States and ask you to purchase a fuel efficient vehicle
assembled right here at home to help shore up jobs and help our environment.”60
The Senate did not vote on a separate rebate bil . CARS was established when a $1 bil ion rebate
program was inserted into a supplemental appropriations bil in a conference committee. That bil
contained no country-of-origin provision.61 After the CARS program concluded, NHTSA reported
that 49% of the vehicles that received rebates were produced in the United States62 (Table 3).

58 Economists at the Peterson Institute for International Economics reviewed the role of various forms of possible aid to
the U.S auto industry in a February 2009 analysis. T he authors noted that a U.S. cash for clunker program with no
country of origin requirements “would not qualify as actionable subsidies under … the WT O ASCM [Agreement on
Subsidies and Countervailing Measures] …” because it “does not mandate that the voucher be spent on domestically
produced cars.” Claire Brunel and Gary Clyde Hufbauer, Money for the Auto Industry: Consistent with WTO Rules?,
Peterson Instit ute for International Economics, Number PB09-4, February 2009, https://www.piie.com/sites/default/
files/publications/pb/pb09-4.pdf. A similar conclusion was reached by other economists. See Kamala Dawar, “ T he U.S.
‘Cash for Clunkers’ Scheme,” in The Legality of Bailouts and Buy Nationals: International Trade Law in a Crisis
(Oxford and Portland, Oregon: Hart Publishing, 2017), pp. 127 -129.
59 “EU/US: Commission T ries to Kill Discriminatory Car Scrappage Bill,” European Report, April 29, 2009, at
http://www.library.coleurop.pl/intranet/documents/ep/2009/ep3743_29apr09.pdf.
60 Representative Sutton, House remarks on consideration of Consumer Assistance to Recycle and Save Act,
Congressional Record, June 9, 2009, p. H6347.
61 T he House-passed bill was never voted on in the Senate. Instead, a revised version of the House legislation, with $1
billion for the rebate program and no country -of-origin limitations, was added as T itle XIII during the conference
committee to a supplemental appropriations bill (H.R. 2346), becoming law on June 24, 2009 (P.L. 111-32).
62 NHT SA, Consumer Assistance to Recycle and Save Act of 2009, December 2009, p. 25.
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Table 3. Country of Origin of New Vehicles in CARS Program
Country of Origin
Percentage of CARS Rebates
United States
49%
Japan
17%
Mexico
12%
South Korea
11%
Canada
10%
Germany
2%
Source: NHTSA, Consumer Assistance to Recycle and Save Act of 2009, December 2009, p. 25.
Note: Total is more than 100% due to rounding.
A study by the Center for Automotive Research later argued that the economic stimulus from the
CARS program would have been greater had the program been limited to vehicles manufactured
in the United States or North America. The center’s econometric model showed that a rebate
program limited to vehicles produced in North America could have added nearly another 16,000
U.S. jobs to the 40,200 that it estimated were created by the CARS Act. The study contended that
“other nations developed regulations that severely restricted the program eligibility of imported
vehicles as trade-ins for higher fuel economy vehicles, or excluded imports from receiving tax
advantages or subsidies.”63
Programs in Major Foreign Markets Differed
Major industrial countries implemented cash-for-clunkers-like programs in late 2008 and early
2009 as the recession resulted in a decline in motor vehicle sales and production in most markets ;
some incentives lasted until 2010. The German rebate program was seen as especial y successful,
and congressional advocates for a similar program in the United States often cited it.64 The
programs varied: not al were run by the government and some did not tie new-car sales to
improved emissions or better fuel economy. Some countries supplemented their scrappage
program with vehicle-related tax reductions.

63 Adam Cooper, Yen Chen, and Sean McAlinden, The Economic and Fiscal Contributions of the “Cash for Clunkers”
Program —National and State Effects, Center for Automotive Research, January 1 4, 2010, p. 14.
64 See press release from the Office of Representative Sutton in this article: Jeremy Korzeniewski, “CARS Act revives
‘Cash for Clunkers’ scrapping plan in U.S.,” Autoblog, March 18, 2009, at https://www.autoblog.com/2009/03/18/cars-
act-revives-cash-for-clunkers-scrapping-plan-in-u-s/.
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Table 4. Fleet Modernization Programs in Selected Countries
2009
Country
Program Summary
Canada
“Retire Your Ride” offered Canadians C$300 (U.S. $285) to scrap vehicles produced before
1996. It was administered by the Clean Air Foundation (a nonprofit organization), and
motorists could choose a transit pass or cash in lieu of a rebate. The government did not
enact a U.S.-style rebate program because a large share of Canadian vehicles are made
elsewhere, and it was thought a rebate program would not stimulate the economy.
France
A subsidy of €1,000 ($1,400) and a tax rebate of up to €5,000 were available when vehicles
more than 10 years old were scrapped for vehicles emitting less carbon dioxide per
kilometer. The 2009 program supported the purchase of about 600,000 vehicles.
Germany
The “Environmental Bonus” program’s dual goals were to stimulate vehicle sales and reduce
emissions. Vehicles scrapped that were at least nine years old received a €2,500 ($3,500)
subsidy, and new cars had to meet Euro 4 emissions standards (set in 2005). It supported
the sale of 1.9 mil ion cars.
United Kingdom
Vehicles at least 10 years old could be traded in for new vehicles, receiving a £2,000
($3,300) subsidy. The UK auto industry funded half of each car subsidy, which was not tied
to buying a more efficient vehicle. Sales of 400,000 new vehicles were generated.
Japan
The Eco-Car program provided a ¥250,000 ($2,600) subsidy for new vehicles if the trade-in
was at least 13 years old; new cars had to meet fuel efficiency and emission standards set to
take effect in 2010. Consumers could also buy new cars with the subsidy without a trade-in,
but the fuel economy of the new car had to be higher than Japan’s 2010 standard and the
emissions had to be 75% below the country’s 2005 standards. Taxes were also reduced on
some cleaner emission vehicles; the rebate and tax reduction could be combined. The 2009-
2010 program subsidized the purchase of 2.8 mil ion vehicles.
China
Sales taxes were cut in half for smal er cars (under 1.6 liters), and rebates of 3,000 RMB to
6,000 RMB ($490-$980) were available for newer vehicles with improved emissions. Initial y,
consumers did not respond to the program, so subsidies were raised at the end of 2009 to
6,000 RMB to 18,000 RMB ($980-$2,940). About 460,000 vehicles were replaced in the
2010 portion of the program.
South Korea
A tax incentive program that provided a partial exemption from the consumption, car
acquisition, and registration taxes was instituted for trade-ins manufactured before 1999,
providing a ₩ 2.5 mil ion ($2,000) subsidy.
Source: CRS.
While some European auto industry executives and government officials expressed an interest in
stimulating sales of vehicles made their home countries, none of the European scrappage
programs included country-of-origin requirements. A news article about the program in the
European Union noted that “although 13 EU member states have similar car scrappage schemes,
the [European] Commission has given them the green light because they do not require the
replacement vehicle to be made in a specific country or region.”
Japan’s rebate program, which initial y excluded most U.S.-origin vehicles, led to objections from
the United States. Under a long-standing U.S.-Japan agreement, a limited number of U.S.
vehicles can be exported to Japan annual y without meeting that country’s emissions and fuel
economy standards. U.S. vehicles imported through this Preferential Handling Procedure (PHP)
did not general y meet the Japanese government’s cash for clunkers emissions and fuel economy
standards for new vehicles. Some Members of Congress and the U.S. Chamber of Commerce
objected to the exclusion of PHP vehicles.65 After the U.S. Trade Representative raised this issue,

65 Ian Swanson, “Chamber, lawmakers pressure Japan on clunker program,” The Hill, January 6, 2010, at
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in late January 2010 Japan modified its program to permit rebates on sales of U.S.-made vehicles
imported through the PHP program.66
A retrospective study of vehicle rebate and subsidy programs in 2009 and 2010 by the
International Council on Clean Transportation (ICCT) evaluated CARS-type programs in major
industrial countries, including the United States. It found that these programs achieved “relatively
low GHG emission and air pollutant savings … at high cost”67 and that GHG emissions were
curtailed mainly in countries like France that set a CO2 threshold for new vehicles. ICCT
recommended that should countries implement similar subsidy programs in the future, countries
should limit them only to battery electric vehicles to achieve the largest environmental benefit;
the authors also recommend pairing such a subsidy program with higher taxes on the purchase of
high-emission vehicles.68
Beyond CARS: Vehicle Rebate Programs in
California
Around the time of the CARS program, the State of California initiated several similar programs
that use rebates to accelerate the replacement of older passenger vehicles and trucks. These
programs, which are ongoing, were designed to remove vehicles with high emissions from
roadways and ports; the transportation sector is responsible for 40% of the state’s greenhouse gas
emissions and 80% of its emissions of nitrogen oxides, which contribute to smog. Preservation of
jobs in auto manufacturing is not among the goals of the programs, which are overseen by the
California Air Resources Board (CARB).
Passenger Vehicles. The Clean Vehicle Rebate Program (CVRP), which is administered by the
Center for Sustainable Energy on behalf of CARB, offers up to $7,000 in rebates for the purchase
of new, eligible zero-emission electric and hybrid vehicles. Launched in 2010, CVRP has
provided rebates for an estimated 350,000 vehicles, with state funding of nearly $775 mil ion.
The purchaser is not required to trade in an older vehicle to obtain a rebate on a new vehicle.69
Rebates vary depending on the type of vehicle purchased; examples include $4,500 for a Honda
or Toyota fuel-cel vehicle; $2,000 for a plug-in electric vehicle such as a Chevrolet Bolt or
Nissan Leaf; and $1,000 for hybrids such as Chevrolet Volt and Hyundai Sonata plug-in hybrid.70
In addition to individuals, rental and car-share fleets may also utilize the program, limited to 20
rebates per calendar year.

https://thehill.com/homenews/news/74639-chamber-lawmaker-pressure-japan-on-clunker-program.
66 United States T rade Representative, “Kirk Comments On Changes T o Japan’s Cash-For-Clunkers Program,” press
release, January 19, 2010, at https://ustr.gov/about -us/policy-offices/press-office/press-releases/2010/january/kirk-
comments-changes-japan%E2%80%99s-cash-clunkers-progra.
67 Georg Bieker and Peter Mock, Green vehicle replacement programs as a response to the COVID-19 crisis: Lessons
learned from past programs and guidelines for the future, International Council on Clean T ransportation, May 2020, p.
18, at https://theicct.org/sites/default/files/publications/Vehicle-replacement -programs-COVID-Jun2020.pdf.
68 Ibid.
69 Suhauna Hussain, “California pulls back clean-vehicle rebates to point them at lower-income buyers,” Los Angeles
Tim es, November 13, 2019, at https://www.latimes.com/business/autos/story/2019-11-13/california-pulls-back-clean-
vehicle-rebates-to-point-them-at-lower-income-buyers.
70 Rebates from the CVRP website, viewed September 2, 2020; https://cleanvehiclerebate.org.
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In December 2019, CARB added new restrictions to orient the program to lower-income
residents:
 vehicles priced at more than $60,000 are no longer eligible for rebates;
 an income cap71 has been instituted; and
 rebates for eligible low-income residents are higher than for other participants:
$7,000 for a fuel cel vehicle, $4,500 for an electric vehicle, and $3,500 for plug-
in hybrids.72
Trucks. A state priority is to replace diesel-powered trucks that service the ports of Los Angeles
and Long Beach, which are the largest North American container gateways. The Hybrid and
Zero-Emission Truck and Bus Voucher Incentive Projects program, launched in 2009, provides a
voucher incentive at truck dealerships at the time of a new truck purchase; incentives for trucks
range from $20,000 to $175,000 depending on the size of the truck and the type of power source,
with higher subsidies for more expensive electric vehicles.73A Clean Air Action Plan cal s for
zero-emission truck fleets in the ports of the two cities by 2035.
To partial y fund the replacement of trucks serving the ports with newer, natural-gas-powered
vehicles, the ports plan to begin levying by the end of 2020 a “clean truck fund rate” on incoming
shipments. It would raise as much as $90 mil ion in the first year, to partial y subsidize truckers
who purchase new vehicles that can cost nearly twice as much as a diesel-powered truck.74 The
clean truck mandate and cargo fee have been controversial, with concerns that cargo shipments
could be diverted to other ports and independent truckers could be priced out of the market with
more expensive vehicle requirements.75

71 T he income cap that limits rebates is $150,000 for single filers, $204,000 for head-of-household filers, and $300,000
for joint filers, at https://cleanvehiclerebate.org/eng/income-eligibility.
72 Suhauna Hussain, “California pulls back clean-vehicle rebates to point them at lower-income buyers,” Los Angeles
Tim es, November 13, 2019.
73 California Hybrid and Zero-Emission T ruck and Bus Voucher Incentive Project (HVIP), viewed September 2, 2020,
at https://www.californiahvip.org.
74 T he ports have determined that subsidies of $100,000 per truck will be needed in the short term, with larger subsidies
when zero-emission, electric trucks are required a decade from now. Bill Mongelluzzo, “ LA-LB ports pledge to
mitigate clean truck fee impact,” Journal of Commerce, March 11, 2020, at https://www.joc.com/port-news/us-ports/la-
lb-ports-attempt-balance-environmental-commercial-goals_20200311.html#:~:text=
T he%20ports%20of%20LA%2DLB,by%20the%20end%20of%202020.
75 Ibid.
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Appendix. For Additional Reading
Bieker, Georg and Peter Mock. “Green vehicle replacement programs as a response to the
COVID-19 crisis: Lessons learned from past programs and guidelines for the future.”
International Council on Clean Transportation (2020). https://theicct.org/sites/default/files/
publications/Vehicle-replacement-programs-COVID-Jun2020.pdf.
Busse, Meghan, Christopher Knittel, Jorge Silva-Risso, and Florian Zettelmeyer. “Did ‘Cash for
Clunkers’ Deliver? The Consumer Effects of the Car Allowance Rebate System.” MIT Center
for Energy and Environmental Policy Research (2012). http://ceepr.mit.edu/files/papers/2013-
009.pdf.
Cooper, Adam, Yen Chen, and Sean McAlinden. “CAR Research Memorandum: The Economic
and Fiscal Contributions of the ‘Cash for Clunkers’ Program—National and State Effects.”
Center for Automotive Research (2010). https://www.cargroup.org/wp-content/uploads/2017/
02/The-Economic-and-Fiscal-Contributions-of-the-Cash-for-Clunkers-Program_National-
and-State-Effect.pdf.
Copeland, Adam and James Kahn. “The Production Impact of ‘Cash-for-Clunkers’: Implications
for Stabilization Policy.” Federal Reserve Bank of New York (2011).
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr503.html.
Council of Economic Advisers. “Economic Analysis of the Car Al owance Rebate System”
(2009). https://permanent.fdlp.gov/lps119620/LPS119620.pdf.
Department of Transportation, Office of Inspector General. “CARS Program: Most Transactions
Met Program Requirements, But Program Completion Activities Continue” (2010).
https://www.oig.dot.gov/sites/default/files/CARS%20FINAL%204.29.10%20508.pdf.
Edmunds.com. “Cash for Clunkers Results Final y In: Taxpayers Paid $24,000 per Vehicle Sold,
Reports Edmunds.com” (2009). https://www.edmunds.com/about/press/cash-for-clunkers-
results-final y-in-taxpayers-paid-24000-per-vehicle-sold-reports-edmundscom.html.
Foster, Ben and Therese Langer. “Cash for Clunkers: A Missed Opportunity for Fuel Economy
Gains.” American Council for an Energy-Efficient Economy (2011). https://www.aceee.org/
research-report/t112.
Gayer, Ted and Emily Parker. “Cash for Clunkers: An Evaluation of the Car Al owance Rebate
System.” Brookings Institution (2013). https://www.brookings.edu/research/cash-for-
clunkers-an-evaluation-of-the-car-al owance-rebate-system.
Government Accountability Office. “Lessons Learned from Cash for Clunkers Program” (2010).
https://www.gao.gov/assets/310/303722.pdf.
Hoekstra, Mark, Steven Puller, and Jeremy West. “Cash for Corollas: When Stimulus Reduces
Spending.” American Economic Journal: Applied Economics, vol. 9, no. 3 (2017).
https://www.aeaweb.org/articles?id=10.1257/app.20150172.
Li, Shanjun, Joshua Linn, and Elisheba Spiller. “Evaluating ‘Cash-for-Clunkers’: Program Effects
on Auto Sales and the Environment.” Resources for the Future (2011). https://media.rff.org/
archive/files/sharepoint/WorkImages/Download/RFF-DP-10-39-REV.pdf.
Mian, Atif and Amir Sufi. “The Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for
Clunkers’ Program.” Quarterly Journal of Economics, vol. 127, no. 3 (2012).
https://academic.oup.com/qje/article-abstract/127/3/1107/1924374?redirectedFrom=fulltext.
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Subsidizing Replacement of Motor Vehicles: An Analysis of “Cash for Clunkers” Programs

National Highway Traffic Safety Administration. “Consumer Assistance to Recycle and Save Act
of 2009: Report to Congress” (2009). https://web.archive.org/web/20100808074852/http://
www.cars.gov/files/official-information/CARS-Report-to-Congress.pdf.

Author Information

Bill Canis

Specialist in Industrial Organization and Business

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Congressional Research Service
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