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
    anymouse, 6 Apr 2009 @ 1:39pm

    Just follow the money

    "by chuck - Apr 4th, 2009 @ 10:11pm
    talk about not thinking about all intended consequences... but what lobbyist was behind this bill???"

    Duh, obviously the lobbyists of the paper industry. Is it any surprise that a 'loophole' lets an industry that shouldn't even qualify for the credit steal 8 Billion in taxpayer money? Times have changed, it's not the 'letter' of the law that is lobbied for, as that part becomes public and the and can be reviewed to see what the lawmakers were doing, it's the various 'loopholes' (like not specifying that a diesel fuel credit is to be applied to transportation companies only) that are lobbied for and that the public has a hard time finding any information about.

    There is a reason loopholes are abused, lawyers spend lots of time crafting those loopholes by carefully wording the law to create the loopholes they desire. Don't think any of this is by 'accident' or an 'unintended consequence', you can bet that some lawyer was paid a large amount of money to help craft the loophole that resulted in this 8 billion dollar credit.

    Just my .02 (shifts tinfoil hat to shiny side out, it works better that way, right?)

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