Keep on Clunkin'!
Look at it this way. Suppose you trade in a car that gets 18 MPG for one that gets 28 MPG, and that you driver 12,000 miles per year. Also, assume that you will keep the new car for the typical six years.
For each of those six years, you will be burning 428 gallons of gas instead of 667 gallons. You save 238 gallons per year, or about 35% of the gas you would have burned.
A study by Toyota showed that as much as 28% of the carbon dioxide emissions generated during the life of a car occur during its manufacture and its transport to the dealer. That means that up to 38% more CO2 is generated than the CO2 generated from the burning of fuel during normal operation.
So, you emit 35% less CO2 during operation, but the act of buying a new car results in up to 38% more CO2 just to get you that car.
Ignoring the economic impact, the very best thing you can do is keep driving that car until it doesn't go any more.
The only exception I can think of is if you put lots and lots of miles on your car every year and plan to keep it a long time. Then, it might make more environmental sense to buy a new, more fuel-efficient car, and donate your old car to charity.
But scrapping the old car, as is required by law under this program, is pure waste.