'Cash for clunkers' kicks in gear

Program originally pitched to help the environment is getting new life as the White House and automakers see its potential to boost sales.

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By Jennifer Liberto, CNNMoney.com senior writer

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WASHINGTON (CNNMoney.com) -- A congressional effort to subsidize new cars sales for consumers who scrap old ones is gaining momentum, as leaders seek to help the struggling auto industry.

So-called cash-for-clunkers legislation introduced in January aimed to encourage the purchase of more fuel efficient cars. Consumers with old, gas guzzlers could get $1,500 to $5,000 vouchers funded by the government to use toward the purchase of new cars.

The goal: reduce greenhouse gas emissions and fuel car sales. How far the legislation should go to accomplish those often competing goals has become a bone of contention on Capitol Hill.

The bills didn't move very far until President Obama weighed in with his support a few weeks ago. Now negotiators are working this week on the details of a cash for clunkers program that would be added to an over-arching clean energy bill.

Obama, in announcing the bankruptcy Thursday of Chrysler LLC, said he was working with Congress to "provide a credit to consumers who turn in old cars and purchase cleaner, more fuel-efficient cars."

However, as lawmakers try to figure out what kind of purchases deserve subsidies, the negotiations are pitting environmentalists against the auto industry.

An environmentally tougher bill would require that the subsidies be limited to new cars that get 25% better gas mileage than current minimum fuel standards (27.5 miles per gallon for passenger cars and 23.1 for trucks). A more lenient bill would offer the vouchers to buyers of new cars that roughly meet current fuel standards.

Environmentalists are concerned that lawmakers are leaning toward making the program overly broad and to use it more for economic stimulus than as an environmental program.

"There is only the mildest nod to the original intent," said Therese Langer of the American Council for an Energy-Efficient Economy. "Clearly the driver is for the proposal to get vehicles off the lots."

Not so, says Mike Moran, a spokesman for Ford (F, Fortune 500). He says that automakers also want to get more energy efficient cars on the road but that the economic stimulus value of the proposal can't be ignored.

For example, in Germany auto sales increased 40% in March after the country enacted a program to subsidize purchase of new cars by scrapping clunkers that are at least 9 years old.

"There absolutely will be an environmental benefit, but we need to focus on why the president is focusing on this: It's the stimulus to buy new cars," Moran said.

Lobbyists say lawmakers are leaning toward applying the more lenient standards to stoke participation. The sponsor of the tougher standards, Rep. Steve Israel, D-N.Y., is disappointed in the direction of the negotiations, according to his staff.

But Rep. Betty Sutton, D-Ohio, points out that the a broader cash-for-clunkers program would offer more help to domestic automakers while also helping the environment.

"The environmentalists have to realize that if three to five million people lose their jobs, the environment will be a luxury," said Sutton's chief of staff Nichole Francis Reynolds. "There's no either or -- we can do both." To top of page

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