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
    Hulser, 3 Apr 2009 @ 8:01pm

    One year review

    I'm starting to think that it would really be a good thing if every federal law passed by Congress required a periodic review cycle. Review it the first year and maybe even the fifth. Whatever. Just something that would require a vote to "re-up" or extend the lifetime of the law.

    The main benefit would be for lawmakers to look at the consequences of the laws to see if they were really what was intended. Maybe you could even arrange it so that it was easier for the lawmakers to skip out on the re-up vote. This way, someone could vote on a bill that was politically popular at the time -- "for the children!" -- and then, when things calmed down, be conveniently absent the day of the re-up.

    The side benefit is that Congress would be so busy reviewing existing laws that they'd have less time to come up more with new shitty laws.

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