Paper industry gets massive US tax rebate for increasing greenhouse gas emissions

Posted: 9 April 2009 in Carbon, International Paper, Subsidies

The paper industry often claims to be green. This story from the US reveals that the paper industry has one goal above everything else: making a profit. The environment is irrelevant to the industry, provided that goal is met.

This year, the US government stands to hand over US$8 billion to the ten largest paper companies in the country. They are doing so because the paper companies are adding diesel fuel to black liquor in order to qualify for a tax rebate for fuel mixtures that combine “alternative fuel” with a “taxable fuel” such as diesel or gasoline. Christopher Hayes writes about it in The Nation:

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. “Which is,” as a Goldman Sachs report archly noted, the “opposite of what lawmakers likely had in mind when the tax credit was established.”

International Paper just pocketed US$71.6 million for one month under this scam.

The Washington Post reports that “The paper companies, which had not applied for these benefits before the end of last year, have not needed to alter or improve their existing business practices to qualify for the tax breaks, analysts said.” But it’s worse than that. In order to qualify for the mixed fuel tax rebate, paper companies are mixing diesel with the black liquor – thus increasing the greenhouse gas emissions from the process.

The next time you hear a paper company claiming to be green, remind them of this story.

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