Clunkers or Junkers? Adverse Selection in a Vehicle Retirement Program

Abstract

Vehicle retirement programs have become popular tools of public policy for reducing pollution. The efficacy of these programs is difficult to measure, as it is difficult to tell how much a vehicle would have polluted otherwise. I estimate that counterfactual using data from a long-running local program in California. I utilize the universe of emissions inspections from the California Smog Check Program to construct vehicle usage histories of retired cars and similar vehicles which did not retire early. I find that the program's cost-effectiveness steadily declined over time because of the depreciation of the vehicle fleet, while adverse selection remained a problem throughout. (JEL D82, Q53, Q58, R48)

Cash for Corollas: When Stimulus Reduces Spending

“…6 Scrappage policies have been implemented in numerous countries internationally; studies of these programs include Hahn [1995], Alberini, Harrington, and McConnell [1996], Adda and Cooper [2000], Miravete and Moral [2011], Sandler [2012], Busse, Knittel, Silva-Risso, and Zettelmeyer [2012], and Klößner and Pfeifer [2015]. More generally, the literature has investigated the determinants of scrappage decisions, including the effect of gasoline prices and used car resale value (Li, Timmins, and von Haefen, 2009;Jacobsen and van Bentham, Forthcoming).…”

Scrapping for clean air: Emissions savings from the BC SCRAP-IT program

“…Our paper is similar to Sandler (2012), who estimates emissions reductions from participation in the Bay Area's vehicle buyback program. Like most other AVRPs, the Bay Area's buyback program provides a cash subsidy of up to US$1000 for scrapped vehicles.…”

“…Alberini et al (1996) find that an offer price of US$1400 is likely to induce vehicles with a three year life into the program. Using data from California's Bay Area, Sandler (2012) estimates survival probabilities of a control group of vehicles not participating in the Accelerated Vehicle Retirement program. He estimates a 3.4 year expected lifetime.…”

The Impact of Emissions-Based Taxes on the Retirement of Used and Inefficient Vehicles: The Case of Switzerland

“…Accelerated vehicle retirement (AVR) programs are popular with the public because of the reward received by car owners that retire their vehicles. However, AVR programs have been shown to be an expensive strategy to retire vehicles (Antweiler and Gulati, 2015;Li et al, 2013;Sandler et al, 2012;Dill, 2004). The results in this paper suggest that a bonus/malus program can encourage retirement of old and highly polluting cars when these vehicles are subject to the malus, but that its success in doing so depends crucially on whether only new and/or existing vehicles are covered.…”

“…These programs aim to encourage retirement of old, inefficient vehicles by buying back eligible vehicles or by offering rebates to individuals trading in an old vehicle and purchasing a new one. 18 However, they are not the most cost effective strategy to retire high emitting cars because they attract car owners that would have retired their vehicles even in the absence of the program (Li et al, 2013;Sandler, 2012;Dill, 2004;Alberini et al, 1996Alberini et al, , 1995. The results from our paper suggest that retirement of old cars can be reached through a bonus/malus scheme as well.…”