US Paper Industries Pull US$8 Billion Bio-Fuel Tax Credit Scam
Cardboard packaging. Image credit:DesignFederation,net
Much of the pulp used for paper-making comes from the century-old Kraft pulping process. Since early the 1930's, operations using it reclaim and burn the process' "black liquor" waste to produce a majority of the energy consumed. Big Paper has discovered a new Kraft process reclamation trick to make millions more each year: by perversely claiming tax credits offered under a "green" Federal fuel blending incentive. Tax credit to encourage blending of ethanol and bio-diesel with petro-fuels.
Specifically, manufacturers of kraft-based papers found a loophole which allowed them to manipulate a Federal tax incentive originally designed only to promote blending of biofuels with fossil fuels that are to be used for transportation.
For the pulpy details see Christopher Hayes: Pulp Nonfiction, published in The Nation. Here's an excerpt or two.
Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel.Also from Haye's article, here's the simile I like best:
"You use the toilet every day," said one hedge fund analyst who's been closely following the issue. "Imagine if you could start pouring a little gasoline into the bowl and get fifty cents a gallon every time you flushed."
I know what some of you are ready to say in your comment post:- 'See, I told you government should stay the heck out of free enterprise.' Here's what I have to say in response.
For the record, the transportation legislation containing this tax credit provision was signed by President Bush in 2005.
Indeed, it is true that the best intentions of government can have serious unintended consequences. This example has an ethical dimension outside usual margins of the debate over the appropriate role of government in business: it doesn't pass the "red faced test". Many laws and regulations are found to need amendment. This law needs to be fixed by Congress ASAP.
Perhaps I can find a press release from a paper maker who took the tax credit while touting green practices or which has issued a Corporate Social Responsibility report. Let's see now...ah here it is.
The US$8 billion dumped on corporate bottom lines could have been spent so many better ways. For example hiring the recently unemployed to plant trees.