Sun Editorial:

When green turns blue

A gloomy picture when green tax breaks result in high costs that were totally unexpected

Monday, April 27, 2009 | 2:10 a.m.

Nevada had its experience with an unintended consequence of a “green” law providing tax breaks, and now the federal government is facing the same dilemma.

A 2007 law was projected by Congress to cost the federal government about $61 million a year. But a new report being studied by a congressional tax committee puts the annual cost at $3.3 billion.

The law seemed straightforward. It offered companies tax credits if they used blended fuels — fossil fuels blended with renewable fuels — in their operations.

As the Associated Press reported last week, the word blended was not defined. But who in Congress could have known about a substance called “black liquor”?

This is a byproduct produced at paper mills and used to power much of the mills’ machinery.

Although black liquor is renewable, it did not qualify for the tax credit because it is not blended with anything. What came next was predictable only to those familiar with paper mills.

Managers began adding diesel fuel to the black liquor. Suddenly, they had a blended fuel eligible for the tax credit.

The report being reviewed by the congressional tax committee was prepared by Goldman Sachs. According to the AP, it estimates that International Paper, based in Memphis, alone could qualify for more than $1 billion in blended-fuel tax credits this year.

Sen. Max Baucus, D-Mont., is now working to exempt paper mills from the law, so its original intent is not subverted.

Nevada ran into this problem in 2006. Officials were stunned to learn that a law offering tax breaks to developers of new buildings if they met “green” construction standards could cost $1 billion. The state had projected that it and local governments would be out only a total of about $250,000. Although the 2007 Legislature modified the law, it still cost about $500 million.

The lesson is that green tax breaks, which we generally support, can be tricky. Legislation enabling them should be crystal clear about for whom and for what they are intended.

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By Future

April 27, 2009

5:52 a.m.

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Still LOL.

For those that keep telling us that green is free we have been telling them that it is not.

For those that keep telling us that green is produces jobs we have been telling them that it does not.

Harry Reid and Nancy Pelosi are inept at writing laws.

Inept renewable laws have been written as a rewards program not economically sound programs.
By neiman1

April 27, 2009

10:11 a.m.

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When any law is passed, the first thing that occurs is thousands of bright people start looking for ways to take advantage of it. When you have all the staffs at the legislature they can only be so careful. They cannot imagine every scenario that might occur.

The best way to handle these items is to NOT do social planning with the tax code.