Accelerated Vehicle Retirement for Fuel Economy: "Cash for Clunkers": R40654.

In an attempt to boost sagging U.S. auto sales and to promote higher vehicle fuel economy, the President signed legislation on June 24, 2009—P.L. 111-32—establishing a program to provide rebates to prospective purchasers toward the purchase of new, fuel-efficient vehicles, provided the trade-in vehicles are scrapped. The program provides rebates of $3,500 or $4,500, depending on fuel economy and vehicle type of both the new vehicle and the vehicle to be disposed of. An amount of $1 billion was appropriated for the program, which was established to cover sales between July 1 and November 1, 2009. Similar programs have been implemented in various U.S. states, but this would be the first federal program. Further, in general those state pilot programs focused on retiring vehicles with older, and in some cases malfunctioning, emissions control systems in order to promote better air quality. The Consumer Assistance to Recycle and Save (CARS) program (also called the Car Allowance Rebate System) focuses, instead, on higher fuel economy and promoting U.S. auto sales. Similar vehicle retirement programs have been implemented in other countries, such as Japan, Germany, France, and the United Kingdom, and have provided at least a temporary boost in auto sales. It was anticipated by industry executives and government officials alike that the impact of this program would be limited for several reasons. First, the time frame of the program is limited, covering only sales between July 1 and November 1, 2009. The bill provided the National Highway Traffic Safety Administration (NHTSA) with only 30 days to complete the rulemaking process, so the official start of the program was delayed until July 24, 2009. Second, the initial $1 billion only allows for rebates for around 250,000 vehicles, which may provide a "shot in the arm" to new vehicle sales, but is unlikely to promote a long-term rebound in the auto market. Third, the environmental benefit of the program is questionable, as the program will retire a limited number of vehicles, and as the required increase in fuel economy is low (only 1 mile per gallon in the case of larger trucks). After officially launching on June 24, 2009, when NHTSA regulations were issued, the CARS program was embraced by thousands of consumers and by auto dealers across the country, who advertised it widely. By the end of the first week, the U.S. Department of Transportation (DOT) announced that nearly all of the funds appropriated for it were committed, based on rising dealer applications for rebate reimbursements and surveying of dealer backlogs. Recognizing the stimulative effect of the program, the House of Representatives voted to appropriate additional funds (H.R. 3435) on July 31, 2009. It raises the appropriation by $2 billion, tapping funds from the economic recovery act (American Recovery and Reinvestment Act, or ARRA, P.L. 111-5). The appropriation passed under the suspension of the rules and by a vote of 316-109. The Senate passed H.R. 3435 on August 6 by a vote of 60-37, and President Obama signed the bill into law (P.L. 111-47) on August 7. This report outlines the key provisions of the CARS program, discusses the initial impact of the program and some of the concerns raised by Senators. It also summarizes similar programs in other countries. [ABSTRACT FROM AUTHOR]