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Cash for Clunkers likely extended despite controversy

The Senate is expected to vote Thursday to add more money to the popular program, but some say there are more efficient ways to get environmental benefits.

The Senate is expected to vote on a bill on Thursday to extend the Cash for Clunkers car trade-in program, but experts contend there are more cost-effective ways to get environmental benefits.

The government-funded program, where people can get up to $4,500 for trading in a car for a new, more fuel-efficient model, has been so popular that it may run out of funding by the end of the week. The House passed a bill to extend the program with an additional $2 billion which, if the Senate passes its version, would give consumers until Labor Day to trade in cars, according to an Associated Press report.

The program has spurred vehicle sales in the ailing auto industry for both U.S. and foreign suppliers. But the program has its detractors, with some warning that the sales spike is temporary and that there are less costly ways to promote green technologies.

"As a carbon dioxide policy, this is a terribly wasteful thing to do," Henry Jacoby, the co-director of the Joint Program on the Science and Policy of Global Change at the Massachusetts Institute of Technology told the Associated Press for an article that analyzes the environmental benefits. "The amount of carbon you are saving per federal expenditure is very, very small."

The cars that are being bought are on average 18 percent more fuel efficient than the cars they are replacing, according to the Department of Transportation.

But the overall impact from the program in reducing greenhouse gas emissions is about saving one hour of the U.S.'s carbon dioxide emissions, according to the AP analysis written by Seth Borenstein.

"It's not that it's a bad idea; just don't sell it as a cost-effective energy savings method," Michael Gerrard, director of the Center for Climate Change Law at Columbia University said in an academic journal. "From an economic standpoint it seems to be a roaring success. From an environment and energy perspective, it's not where you would put your first dollar."

Also, the additional $2 billion in funding to extend the program would come from a loan guarantee program for deploying renewable energy projects, such as solar and wind farms. In the current financially constrained funding environment, renewable energy company executives say that the Department of Energy loan guarantee program is very effective.

"Redirecting one-third of the monies allotted to the loan guarantee program to reseed the Cash for Clunkers program--which has already taken an estimated 250,000 pollution-heavy cars and trucks off the road--appears to be a politically advantageous, though economically short-sided, move," wrote analyst Nadav Enbar in an IDC Energy Insights paper.

He calculated that the $6 billion originally allocated for the DOE loan guarantee program could result in over $100 billion in economic activity in the U.S.

See CNET Car Tech's choice of six cars that get the full trade-in value of the Cash for Clunkers program and meet the maximum price requirement.