[Update June 20 2009
If you are considering a trade in, please use the tools linked here to see the cash value of your gas savings. The gas savings can be more valuable than a Cash for Clunkers voucher.
The final bill is linked to this post. The details below refer to an older bill.]
Bill Chameides, dean of Duke's Nicholas School, has a nice post on Cash for Clunkers at his Green Grok blog (see also this Christian Science Monitor article and Huffington Post summary):
He provides data showing that the CO2 emissions from manufacturing a new vehicle are close to 7 tons on average, which is a higher figure than I was assuming in earlier posts. That makes the CO2 "pay back" period longer when replacing an old car with a new one. Although my favorite example of replacing a 14 MPG car with a 25 MPG car holds up fine (the carbon emissions are offset in less than 25,000 miles of driving), the case for smaller improvements becomes much harder.
The New York Times reviews the two bills currently circulating: The Israel/Schumer/Feinstein bill ensures a sizeable increase in GPM (roughly from the mid teens to the high 20s) that quickly "pays" for itself in CO2 reduction; the Sutton and Stabenow bills do not.
The key insight: Ideally, Cash for Clunkers rebates would be tied to the magnitudue of GPM improvement. The goal would be to reimburse a 14 to 25 MPG replacement more highly than a 24 to 27 MPG replacement (the first change reduces CO2 by 3 tons over 10,000 miles, the second by just half a ton). If reimbursements are not tied directly to GPM improvements, then the focus should be on rewarding trading in cars in the teens for cars in the high 20s (as emphasized in the Israel/Schumer/Feinstein bill).