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FRIDAY, NOVEMBER 27, 2009
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 ANALYSIS 
3

Paper Industry Gets Tax Credits for Burning Diesel

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(Newser) – A tax provision in the 2005 transportation bill offering credits for the use of alternative fuels has had an unintended, even disastrous, result in the paper industry: “Paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit," Christopher Hayes writes in the Nation. The industry gets the majority of fuel it needs for the papermaking process itself, but it saw a very profitable loophole.

The bill offers a 50-cent-per-gallon credit to companies that incorporate biofuel, like the “black liquor” produced by the paper process, into “taxable” fuels like diesel. So, add a bit of diesel, and all of a sudden the struggling industry is in line to get an estimated $8 billion from the government this year. “Imagine if you could start pouring a little gasoline into the bowl and get fifty cents a gallon every time you flushed,” one analyst said.

A shuttered paper mill.
A shuttered paper mill.   (AP Photo)
A truck loaded with rolls of newly produced recycled paper leaves a mill.
A truck loaded with rolls of newly produced recycled paper leaves a mill.   (AP Photo)
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It's probably close to a billion a year of cash. If you look at the economics of this business, to make that kind of money today you'd have to be on another planet.
- Analyst Brian McClay on International Paper's profit from the credit

By adding diesel fuel to the black liquor, paper companies produce a mixture that qualifies for the mixed-fuel tax credit, allowing them to burn "black liquor into gold," as a JPMorgan report put it. - Christoper Hayes

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SPH
Apr 4, 09 8:22 PM CDT
The tax code is ridiculous..... Reply
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radnip
Apr 5, 09 2:46 AM CDT
The carbon credit/trade thing is ridiculous.
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kokuaguy
Apr 19, 09 2:29 AM CDT
How long will it take for Congress to correct this rip off? Reply
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