Just Add Diesel: How Unintended Consequences Rob Taxpayers Blind

from the regulatory-mess dept

One of the reasons we're often skeptical of legislative/regulatory solutions to things is that they almost always have unintended consequences that do a lot more harm than good -- and quite often those unintended consequences are the exact opposite of what the regulation was supposed to do. Tim Lee points us to an excellent, if depressing, example. A few years back, the government passed a bill to encourage "greener" transportation by providing tax credits for the use of alternative fuels -- including for the use of fuel mixtures that combined alternative fuels with gasoline or diesel. As Chris Hayes explains, this resulted in America's paper companies suddenly dumping diesel into their production process solely to qualify for the tax credit.

The end result is staggering. The paper companies are wasting diesel fuel (remember, the whole point of this bill was to decrease the use of such fuels) by adding it to a process even though it's entirely unnecessary, and then claiming the tax credit. And, boy, is it worth it. The top ten paper companies are likely to take in $8 billion dollars from this tax credit. The money coming from this is so valuable that it dwarfs the actual paper business. The industry is making a lot more money throwing diesel fuel away than actually selling paper. And that is a perfect example of why even the best intentioned regulators often end up doing an awful lot of damage.

Filed Under: green energy, paper manufacturers, politics, regulations, unintended consequences


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  1. identicon
    Gryphon, 4 Apr 2009 @ 5:50am

    Re:

    It's purchased: Natural gas, wood chips for boiler fuel, electricity, etc. Papermills generate a good portion of their process energy, but they still need stuff off the grid.

    This bill should have clarified that the credit is given to transportation industries only, to be used only for devices that directly transport things. That probably would have stopped all this nonsense. But I don't blame someone for taking a credit. Leave the door open and people will eventually come in.

    As it is, I use Kerosene to augment the natural gas heat of my home. I'm wondering if I could claim that...

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