Unintended ConsequencesCongress, in its wisdom, decided that alcohol should be used in motor fuel, so they devised a plethora of tax advantages to spur this dubious use of food crops. Now they have discovered that paper pulp manufacturers are using the letter of the tax break law to spew extra carbon into the atmosphere, and net a huge windfall at the same time.
It seems that pulp manufacture creates a by-product called black liquor. Sounds like nice stuff, doesn't it? Under the "green" tax law, by injecting diesel fuel into the black liquor they create a form of bio-diesel, and thus are allowed a tax break that amounts to a half dollar per gallon of the composite fuel. As Bloomberg reports, "The windfall for 30 paper-producing companies in the U.S. may total about $6.6 billion and could rise as high as $10 billion."
That's more money than many of these companies make from their operations, for some more than their entire market capitalization. They are ramping up production to qualify for more credits, even as a soft market for magazines and packaging has caused a price drop. This is a cautionary tale, showing how actions of government always carries unintended consequences, and it should be hoped that boondoggles like this make people take notice, as congress prepares to pass massive changes in the law, often with little debate or deliberation.