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.
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Filed Under: green energy, paper manufacturers, politics, regulations, unintended consequences
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One year review
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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MTBE flap
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Paper companies: "lets take advantage of a loophole to defraud the government of a few billion dollars now and we'll worry about how we're destroying our industry later."
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Re:
Nah...they aren't destroying their industry...besides someone is going to have to sell the government the paper to print all that money they are throwing at the banks.
Just think...we will all be millionaires soon, but it won't be worth it when a loaf of bread costs you a couple of thousand of that freshly printed money.
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"Seventy-three percent of the energy we use in our mill system we produce," says Ann Wrobleski, IP's vice president for global government relations
What was the other 27%? Did diesel displace something else? If so, what was that something else?
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Re: Re:
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Re: One year review
"Sir, when you've got laws, you don't need common sense".
This is not only an accurate reflection of many people's opinion, it is also deeply disturbing.
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Diesel needed
Diesel vehicles are also beneficial compared to gasoline powered ones when it comes to reducing dependency on foreign oil. Diesel engines are 20-40% more efficient.
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news... paper?
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Re:
This bill should have clarified that the credit is given to transportation industries only, to be used only for devices that directly transport things. That probably would have stopped all this nonsense. But I don't blame someone for taking a credit. Leave the door open and people will eventually come in.
As it is, I use Kerosene to augment the natural gas heat of my home. I'm wondering if I could claim that...
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I MEAN WHILE YOUR MAKING THE LAWS WHY NOT COVER A LOT OF LOOPHOLES ALL AT ONCE.IM SURE THOSE WITHOUT THE MEANS TO PERPETRATE THIS LEVEL OF FRAUD WONT MIND ELECTING A GOVERNMENT WHO CLOSES, ACCROSS THE BOARD LOOPHOLES THAT ONLY TOP 5% OF THE POPULATION CAN PERPETRATE, BUT SINCE THEY ONLY NUMBER AT 5% OF THE VOTING POPULATION THEY MIGHT HAVE TROUBLE STOPPING A GOVERNMENT DOING THIS?
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Adding diesel to make paper
"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".
Not true, and totally unfair - though I realize it motivates the lynch mobs. Substitute "almost always" with "occasionally" and you have a good article.
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Re: One year review
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Re: One year review
I imagined that the quality of law will go up since congress will have to compete with other lawmakers so that they will get the customer's money.
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Re: Diesel needed
Yeah. Let cut oursleves from the world. We don't need anybody!
While we're at it, let cut off trade from our supermarket and disel gas station! We all produce our own food!
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Re: One year review
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This is what happens when..
Lawyers,
1. Thrive on contention and discord
2. Lie convincingly
3. Have little or no scientific knowledge
4. Are trained to apply rules rather than reason
5. "Usually" have little respect for other disciplines
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What Is Seen and What Is Not Seen
http://www.econlib.org/library/Bastiat/basEss1.html
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Re: Adding diesel to make paper
President Moron left office back in January. Please try to keep up.
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Re:
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Re: Re: Adding diesel to make paper
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Re: Re: Adding diesel to make paper
Replaced by a new moron. Only this one thinks he's a genius.
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Re: This is what happens when..
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Add diesel to,...
Unfortunately, very few law makers have a corporate genius on the payroll to tell them "That one will backfire badly." This is because the corporate genuis wouldn't be caught working for a living!
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You don't get it
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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KISS is a good principle when it comes to laws. And thinking through the economics is also a good principle.
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Currently, in big public companies, the stockholders have precisely zero control over the Board of Directors unless they're rich enough to run a 'proxy fight' (spend $100 million off the top, win or lose).
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Re: One year review
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Re: Re: Adding diesel to make paper
Currently, the recent actions of the president in office now, made me think "President Moron" was a perfect fit. I always like to know the U.S. will be Quadrillion dollars in debt before I reach retirement age.
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Re: Re: This is what happens when..
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Re:
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It is simple:
-There is no such thing as a free lunch.
-Incentives matter.
-Government consists of people. Generally, these are mediocre people at best, a situation made worse by their insulation from consequences and lack of exposure to or compentency in business or anything requiring actual results.
Elected officials and bureaucrats can weigh political decisions that may affect directly their term in office. However, it is grossly mistaken to think they can weigh costs and benefits at large to the economy, the environment or anything else. They can restrict inputs through coercion, but they cannot dictate outcomes.
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Just follow the money
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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Re: Re: Re: This is what happens when..
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Re: Re: Diesel needed
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Re: You don't get it
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They add $2.00/gal of unneeded diesel to their existing 'black liquor' and burn the mixture to produce their energy. The government then pays them back at the rate of $.50/gal. How is this making the paper companies any money? They are still spending $1.50/gal for unnecessary diesel.
What am I missing? (For this post, I am truly an anonymous coward!)
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From someone who knows what she's talking about
The IRS signs off on every mill that qualifies before they can start burning, and the people that this actually stands to help the most are independent mills that don't have other suffering industries to support with the economy the way it is. While a lot of people within the industry have their reservations about his, ultimately no one is going to say that keeping afloat and being able to keep paying workers is a bad thing. I certainly don't think so.
And, seriously, people, do you have any idea how much taxed road diesel is actually involved? To qualify, at least 0.1% diesel by volume of black liquor is added, and most mills will skirt pretty close to that ratio, since the idea is not to burn a lot of diesel. In a year without a tanked economy, we'd make considerably more money on paper, and it varies mill to mill, depending on the product, so don't just go spouting off tasty gossip like it's fact, please.
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Who's looking out for us.....
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