Saturday, August 1, 2009

$3,500 clunker credit is worth $28?

The cash for clunkers auto bailout/climate change plan is booming.Certainly the members of Congress will continue to "find" billions to extend it as they can't pass up the good PR.

The good part?It's certainly generating traffic and sales for the car dealers.It also will save fuel with the mpg savings,CO2 emissions with the newer vehicles,and put safer cars on the road.

The bad part?Once again,just as the housing bubble was created by enticing people to buy more expensive homes than they can afford,we are now encouraging people to take on a car payment with a new car bought on credit.In most cases,they were probably driving a paid for vehicle,likely with reduced insurance premiums.Now it's another bill,a car payment and full coverage insurance.

Of course,these still functional vehicles are now being destroyed which removes cheaper,used vehicle options for people who can't afford a new car.

The recyclers are taking a hit because the engine is the most valuable part of a salvage auto and is being made unusable.This part I love.The process to seize the engine and kill it is by draining the oil and refilling it with a sodium silicate solution.This is the same stuff used to plug radiator leaks.The beauty of it?To make sodium silicate,you combine sodium carbonate with silicon dioxide which creates sodium silicate and CARBON DIOXIDE!Yes,a byproduct of the mixing process is the same greenhouse gas we are trying to reduce.Look it up yourself.

The EPA estimates that the average passenger car produces 11,450 lbs. of carbon dioxide emissions annually.The cash for clunkers program is issuing the dealer a credit of $3,500 for a 4 mpg increase as one option.With a 18 mpg or less trade-in requirement,this is roughly a 22.25% increase in mileage for this example.Each 1 mpg increase results in a 1% decrease in carbon emissions.So,the 4 mpg increase was 22.25%,or 2,547 lbs. of the annual 11,450 lbs. emitted.A metric tonne weighs 2,204 lbs. so the 4 mpg increase saved us just over 1 ton of carbon emissions.According to the CBO report on cap and trade,a carbon offset credit equal to 1 metric ton of emissions should be worth approx. $28 in 2020.For our 4 mpg increase in mileage,the taxpayers are paying $3,500 for a credit worth $28.Now that sounds like Government at work.Sure there are variables and other factors.Producing a new vehicle and recycling the clunker as well as the sodium silicate solution results in an increase in carbon dioxide emissions.The increased mpg results in less fuel consumption which translates to a decrease in carbon emissions.The X factor is miles driven by the consumer and that will obviously vary.

Does the ends justify the means?I report,you decide.More to come...

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