"In a year where the government famously entered the automobile business and spent months trying to increase its presence in the healthcare industry as well, state support of the pulp and paper industry went largely unnoticed by the general public. On the level of sheer weirdness, and as a case study in unintended consequences, however, it was at least the equal of the more notorious bailouts. In one year, approximately three dozen companies received upwards of $8 billion from the U.S. Treasury for increasing their consumption of diesel fuel when they were supposed to be decreasing it, depressing worldwide paper prices at a time when demand for paper isn’t particularly strong, and discouraging the production of recycled paper in the name of environmental sustainability. Oh, and as if that weren’t enough, they almost started a war—okay, a trade war—with Canada!"
International Paper and other paper companies burn their waste as fuel for their operations. By adding diesel fuel to the waste ("Black Liquor"), it qualified them for huge tax credits as an alternative fuel. They made much more from these credits than from any other operations such as, well, making paper. Suddenly they were able to sell paper at less than cost, and Canadian competitors felt this was an unfair government subsidy.
Moral of the story? Anytime the government gets involved in the marketplace, it'll f**k it up, and sharp operators will take advantage. Good thing it's only paper, and not something important, like health care!
0 comments:
Post a Comment