Paper Industry Gets Tax Credits for Burning Diesel

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. (More paper industry stories.)