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
    SuperSparky, 5 Apr 2009 @ 8:27pm

    You don't get it

    You guys wouldn't know the obvious if it fell out of the sky, landed on your face, and started to wiggle!

    The problem with most "environmental" laws and those that make them, is all the do is punish. If they just understood how things work, they'd change their tactics. Frequently, the attitude is you MUST do it this way or we'll punish you. The other method is usually a long list of moronic requirements and restrictions written by some idiot without a clue about how business and commerce work.

    Think of PEOPLE and how PEOPLE react to things. Give them an incentive and they act (which is the lesson here). Treat them like crap, with no incentive to change or no other means, and they sneak behind your back.

    How about have incentives for doing things clean and right, and then punishments for the wrong things? It's not rocket science. I hear so many people always demanding punishments yet offering no incentive. Free money, by the way is no incentive.

    The incentives should be simple and not specific. This promotes ingenuity, and besides, lawmakers and environmentalists are idiots when it comes to the environment and business. Incentives like considerably lower tax rates for new cleaner technologies they implement. Incentives to relocate plants to less sensitive areas, and lower employee and income taxes, and such.

    You get much more results with honey than you do with vinegar.

    Things like two years, tax free to help them develop alternative methods of doing something.

    Want to control executive salaries? Offer incentives to give bonuses to all employees instead of just those at the top. Offer to limit investment taxes for stock holders (they elect the execs). Make laws to give contract preference to those that make successful efforts to clean up their act, or by policy are clean and safe, etc.

    I swear, environmentalists and liberals are always too angry to see what the most effective means is to accomplish their goals. Is it only Obama that understands the concept of telling people to go to Hell and yet make them excitedly look forward to the trip?

    All punishments need to be matched with rewards and incentives if you REALLY want to change things.

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