Incentives for switching to an electric car have been around for a while, but not everyone has taken advantage of them. Although tax credits appeal to some people, a more direct approach may encourage more people to get an electric vehicle. One option, proposed by Senator Chuck Schumer, is to offer cash rebates to individual buyers.
The Cash for Carbon Plan
Last year, Senator Chuck Schumer proposed a plan that would provide consumers with a rebate if they purchased an electric car. The plan, which some are calling “Cash for Carbon,” would include $392 billion in subsidies. Americans would receive cash vouchers to replace their gas-powered vehicles with electric ones. A buyer would receive a $3,000 to $5,000 rebate under this plan.
To qualify, a buyer would have to trade in their gas-powered cars, which must be at least eight years old and drivable. It’s estimated that Cash for Carbon would change up to 25 percent of the total vehicles in the U.S. to electric while scrapping the older ones.
One of the goals of the plan is to move the country toward net-zero carbon emissions. It would decrease the total number of older vehicles on the road and encourage buyers to get more energy-efficient cars. The plan would also include money for electric vehicle charging stations and manufacturers to make more cars that are electric.
It’s important to note that the plan is still a proposal and has not become law. It’s not clear if or when the plan would move forward.
Revisiting Cash for Clunkers
The Cash for Carbon plan has many similarities to the Cash for Clunkers plan. In 2009, Cash for Clunkers gave owners a stimulus for trading in their old vehicles. Officially called the Car Allowance Rebate System (CARS), the $3 billion program encouraged people to purchase more fuel-efficient vehicles and boost the economy at the same time. Owners could receive a credit of up to $4,500.
Similar to the proposed Cash for Carbon plan, Cash for Clunkers had strict requirements for receiving the money. Owners had to trade in cars that were less than 25 years old and rated less than 18 miles per gallon in fuel efficiency. The vehicles also had to be drivable. After the trade, the cars had to be scrapped. A total of 677,000 fuel-inefficient cars were removed from the roads because of the program.
Cash for Clunkers was controversial with critics claiming that it didn’t do enough to stimulate the economy, and not enough people actually switched to fuel-efficient cars. There were also arguments that the program created a burden on lower-income households because they couldn’t find used vehicles to buy. In addition, Cash for Clunkers led to higher prices on used cars due to the shortage of available items.
Do Incentives Work?
Critics argue that incentives like rebates or cash vouchers don’t help because only the people who were planning to buy a new vehicle anyway decide to participate. Many cash-strapped and lower-income people aren’t able to participate in the programs and may actually be hurt by them when there are fewer older and cheaper cars to buy.
Supporters think that incentives help encourage car owners to make the switch to cleaner, more efficient cars. They also think that these programs help car manufacturers and the economy by encouraging shopping. Moreover, they point to the removal of older cars from the roads as a way to help the environment.
For now, Cash for Carbon isn’t up for debate in the coming months. However, the idea of offering incentives like this may return eventually.