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Should you buy a used car to be carbon-friendly?
Megan McArdle shows at least four hands:
The supply of used cars is pretty well fixed--they have to be in pretty horrible condition before they're junked rather than resold for a pittance. So the correct calculation is not how much you will emit by driving one, but how much you will emit compared to the person who would have bought the car.
But then, that person would probably have bought another car. If they would have bought a Prius, you've simply swapped places. If they would have bought another car, you've increased demand for a less fuel-efficient option.
On the third hand, as far as I know most industry analysts still believe that Toyota breaks even, or loses money, on the Prius, and so the normal price signal sent by buying a car--"increase supply of that model"--may not operate. If the person who would have bought a used Corolla instead buys a new Corolla--or someone far down the purchase chain does--you've probably done more for the environment than you would by buying a Prius, because you've actually increased the supply of fuel-efficient cars.
In fact, it seems to me that the best option is to buy a used SUV and drive it very little. But I have a feeling that this would not give a potential Prius owner everything they are looking for in a car.
Posted by Tyler Cowen on July 8, 2008 at 01:38 PM in Economics | Permalink
Comments
You can buy "HYBRID" emblems for your S.U.V.
Posted by: Hinheckle Jones at Jul 8, 2008 1:50:22 PM
The complexity of such calculations -- as well as the power that it gives to eco-high-priests -- demonstrate
exactly why Bob Murphy's lame suggestion of "just put social pressure on people who use too much carbon!"
doesn't work. The carbon externality needs to be priced directly into the inputs so that the trade off of "how much is this worth to me vs. harm to others" is automatically calculated in the price the consumer sees.
Posted by: Person at Jul 8, 2008 2:01:56 PM
Hi!
I own a 1990 Isuzu Trooper, which in the last three months was driven less then 200 miles. The reason you state is exactly why I do not bother to own a new car.
Cheers,
-Brian
Posted by: Brian Aker at Jul 8, 2008 2:11:20 PM
Why take the number of used cars as fixed? Instead, take the number of miles as fixed. It's a coarse assumption, sure, but good enough. Then miles driven on a hybrid replace miles driven on the worst mileage used car. This comparison is what makes hybrids look so good. (Again, it's a reasonable assumption that the car with the worst mileage is the one whose mileage is replaced, once you work through the chain of ownership. Coarse but reasonable.)
But Person is right. Once you put a price on carbon, you don't need to make these indirect calculations.
Posted by: John H at Jul 8, 2008 2:30:30 PM
I seem to remember a story about power plants buying cars more than 15 years old and then trashing them as an environmental offset (this was 15 years ago or so, before 'carbon footprints').
Buy the new car and then push for higher emission standards.
Posted by: VC at Jul 8, 2008 2:33:40 PM
Someone once called it the Toyota Pious. I am beginning to understand why.
Posted by: Yancey Ward at Jul 8, 2008 2:58:47 PM
The use of opportunity cost here is genius. But it's unrealistic to say that if a person chooses not to buy the used car, then they will buy a Prius. They are far more likely to go to another used car that emits the same amount. I like the idea of buying an SUV and driving it less. How about the government buying up high GHG emitting vehicles and scrapping them?
Posted by: Blake Shurtz at Jul 8, 2008 3:04:32 PM
"The carbon externality needs to be priced directly into the inputs so that the trade off of "how much is this worth to me vs. harm to others" is automatically calculated in the price the consumer sees."
I would agree with this, though would watch bemusedly as that calculation is politicized mercilessly (akin to CPI inflation calcs).
Posted by: meter at Jul 8, 2008 3:11:02 PM
You people are crazy. Don't worry about whether to buy a Prius v. used car, just stop eating meat:
But wait! If you stop eating meat and end up living longer, you'll end up using even more carbon in your old age.
Posted by: d at Jul 8, 2008 3:15:23 PM
NPV of all expected cash flows divided by the average price of energy (you may want to identify type energy).
If you pay a premium, you are financing someone else's consumption. The value of a resource is the work needed to find it/get it.
Posted by: aaron at Jul 8, 2008 4:12:16 PM
Why is the supply of used cars fixed? People sell or trade their old cars constantly. Lots of cars come into the used market every day.
Posted by: Bernard Yomtov at Jul 8, 2008 4:21:15 PM
Someone once called it the Toyota Pious. I am beginning to understand why.
http://en.wikipedia.org/wiki/Smug_Alert!
Posted by: Christina at Jul 8, 2008 4:21:51 PM
If you fancifully imagine taking a random 5-year-old 2003 SUV out of someone's hands and then asking them to make a purchase again, will they buy a more efficient vehicle? Perhaps, since SUV's cost more to own than they did in 2003 (due to higher gas prices), and because on average the 2004-2008 vehicles are more fuel efficient due to technology improvements.
In this reasoning by following Megan's advice you add to the liquidity of the market at the bottom end, and hasten the replacement of high-pollution cars by people who to some degree must regret owning such a high-cost vehicle.
By the same token if it becomes very cheap to own an SUV (gas prices sink), you should flood the market with used cars to make it impossible for people to trade in their current car for a higher-polluting replacement.
Posted by: mk at Jul 8, 2008 5:04:21 PM
Eliminate car taxes and make auto liability insurance attached to the driver, not the car.
I'd like to have a gas guzzler to drive once a month and a commuter mobile for everyday.
Posted by: Andrew at Jul 8, 2008 5:30:59 PM
Seems to me the strategic issue here is to replace old cars with new hybrid (or other environmentally friendly) cars. The goal is to upgrade the national car fleet. Therefore, what individual actions accomplish that?
It's a given that the old cars will stay in the fleet for a long time because of the used car market. While there are things one can do to reduce that cycle and take out these used cars, there is no guarantee that the replacement car will be more environmentally friendly. In other words, at this time the used car market is immaterial.
What's important is that the new cars coming into the fleet have a greater percentage of hybrids than the old cars. Only if that number is increasing will it matter if a used car is taken off the market because it's replacement will increasingly be a hybrid. So the critical step here is that new cars should be increasingly hybrid. Therefore, you should buy the hybird. Not only have you decreased emissions by your choice of a new car, you have de facto also reduced the possibility of a future used car buyer from being able to buy a non-hybrid car.
Over time, you eventually replace the old fleet of used cars with hybrids as well as having new cars be hybrids as well.
If you buy a used car with old technology, you just perpetuate the old cars being on the market. No shift occurs over time.
Posted by: Chris Durnell at Jul 8, 2008 6:39:51 PM
"Therefore, you should buy the hybird. Not only have you decreased emissions by your choice of a new car, you have de facto also reduced the possibility of a future used car buyer from being able to buy a non-hybrid car."
Chris Durnell, but in the process you reduce the demand for used cars. By reducing the demand you lower the price. By lowering the price you make it economical (on the margin) for a buyer to enter the market that would otherwise use public transportation or rely on friends and family to get around. I know I'm repeating Megan, but apparently Chris didn't get this.
If you want to reduce emissions one should seek out "gas guzzling" vehicles and destroy them. Not only do you increase the price of the remaining "gas guzzlers" pricing buyers out of the market, but you also fore go someone else's future emissions. I'm sure you can find some rich yuppie donkey's that worship "mother earth" and would pay for you to purchase a fleet of Hummers and Escalades with the intention of blowing them up.
Posted by: Jay at Jul 8, 2008 7:52:13 PM
McArdle seems to be missing a basic point that by increasing the resale value of SUVs, your purchase of a used SUV would encourage people to buy new ones.
Person, in the future, if you are going to ridicule and paraphrase my views on something, please at least provide a link so others can judge for themselves. Thank you.
Posted by: Bob Murphy at Jul 8, 2008 8:03:42 PM
@VC: I think that the story you are remembering was othe CA gas stations buying and scrapping old cars to prove that it was a cheaper way to reduce emissions than installation of computer controlled gas nozzles that eliminated the ability to overpump and thus spill gas onto the pavement.
@Jay: Lowering demand for used cars will lower the price of them, thus pushing more of them to be less than there scrap metal value. Increased gas prices have already done the same thing, so high oil/gas prices will reduce emissions not only by lowering miles driven, but also by rendering many old and inefficient cars useless.
Posted by: liberalarts at Jul 8, 2008 9:07:01 PM
@Bob Murphy: My apologies, I didn't want to make your position look any worse than it already does by showing everyone the things you actually end up saying to defend it. But if you're going to link to the full discussion, link to my longest critique of social pressure on carbon emitters instead.
[When you talk about social pressure on emitters, you're] not seeing how your'e basically conceding the calculation debate, since the possibility of a public boycott getting producers to accurately account for consumption of [a] resource (as opposed to pure private property + supply/demand) implies the possibility of non-price accounting of the cost of scarce resources.
For everyone here: My characterization of Bob's position is an accurate one and I defy anyone to show me where he gave further substantiation for or clarification of that idea.
I also strongly encourage everyone to follow the links on my blog, get familiar with the deficiencies of Bob's position, so that you know how messed up Bob's position is any time he posts anywhere.
Posted by: Person at Jul 8, 2008 9:58:06 PM
If you want to drastically reduce your carbon footprint, do like I do: eat out of dumpsters. That way, transportation companies only burn oil bringing food across the country to the people whose waste I feed off of. Now that's what I call being a free rider!
Posted by: Jason Armstrong at Jul 8, 2008 10:45:41 PM
If you want to drastically reduce your carbon footprint, do like I do: eat out of dumpsters. That way, transportation companies only burn oil bringing food across the country to the people whose waste I feed off of. Now that's what I call being a free rider!
Posted by: Jason Armstrong at Jul 8, 2008 10:46:15 PM
Serious question: How does the carbon cost of making the new car factor in? The carbon cost of manufacturing the used car is a done deal. So the comparison is between the footprint of using the old vehicle versus the footprint of using the new vehicle plus the footprint of making the new vehicle.
Posted by: Michael at Jul 8, 2008 11:12:49 PM
I was watching Jay Leno one night, and his guest actress (can't remember who it was) was talking about how she was wanting to help the environment so she sold her porsche for a hybrid vehicle. But, it was okay because "she didn't drive it that much anyway". I can't remember if Jay pointed out the flaw in her logic, but we should just remember that when it comes to politics, economics, and the environment, Hollywood knows best!
Posted by: BrianF at Jul 8, 2008 11:41:29 PM
When a car of a given gas milage and longevity is manufactured, at first blush it would appear that its carbon footprint, and the number of miles of transportation it will deliver over time, are pre-ordained.
However...
A car that is used very little is likely to become junkable due to a form of deterioration that is time-proportional and not miles-proportional. In an extreme case it may become impossible to get oil filters. So if you plan to drive so little that the vehicle will age out of use before it wears out, you should buy the least economical used car you can find. If you believe that Toyota will not expand the supply of Priuses when people buy more, because they don't make money on them, you would certainly increase the world's carbon footprint by buying a Prius out from under someone who would actually drive it.
It should be noted that there is likely to turn out to be a limit of 12-15 years on the lifetime of the Prius traction battery, no matter how little you use the car. If that's the case, a severely underutilized Prius is truly tragic [although it's likely worth one battery replacement at $5000].
-dk
Posted by: Dick King at Jul 8, 2008 11:58:59 PM
I think it takes something like 0.6 of a ton of coke (carbon) to make a ton of steel. As a very rough guess I would say making a car releases about as much carbon into the atmosphere as the car weighs. Around here the average car emits about 1.5 tons of carbon a year.
Posted by: Ronald Brak at Jul 9, 2008 12:07:34 AM
