As President Barack Obama unfurls his fuel-economy standards and Congress takes up global warming regulations, it’s useful to remember that what emerges from environmental policymaking is not necessarily what’s best for the planet, but instead what’s best for special interests.
Consider the epic and somewhat bizarre struggle over clean fuels that ended last week. As usual, special interests were central to the drama. But the antagonists seemed right out of a Monty Python sendup of Washington politics: An oil company, hoping to profit from making trucks run on chicken fat, was thwarted by the soap industry’s lobby.
The chicken-fat story is a cautionary tale about how environmental policy actually gets made.
It began in 2005, when President George W. Bush signed an energy bill including a $1-per-gallon tax credit for “renewable diesel” fuel created through “thermal depolymerization.” Writer Rina Palta reported in the liberal American Prospect that Rep. Roy Blunt, R-Mo., wrote the measure “to benefit a floundering company in his home district that produces boiler fuel from turkey offal, which did not qualify chemically as ‘biodiesel.’ ”
At the time, Congress was eagerly providing subsidies to turn plants and animals into fuel, so it didn’t seem farfetched to boost the cause of fowl entrails. But unintended consequences soon arrived, proving once again that the biggest companies usually find a way to profit from government intervention.
In April 2007, the Internal Revenue Service ruled that Blunt’s tax credit had broader applications. Within two weeks, ConocoPhillips and Tyson Foods saw that the IRS had opened the door for a joint venture to melt chicken, cow, and pig fat into diesel fuel. Conoco Chief Executive Officer James Mulva was honest about his unusual undertaking: “It’s not profitable without the $1 per gallon tax credit,” he said at a news conference.
But this renewable fuel had enemies. First, Democrats didn’t like any subsidy that helped an oil company like Conoco. (Blunt, for his part, said he never wanted to help oil companies, and that the law should be changed.)
Second, business lobbyists were also working to kill the subsidy for chicken fat. The obvious opponents were chicken fat’s competitors — the companies that turn vegetables into diesel fuel. The National Biodiesel Board, which spends nearly $1 million a year on lobbying, pushed hard to ensure the $1-per-gallon subsidy for clean diesel didn’t also apply to the Conoco-Tyson operation.
But the issue of “renewable biodiesel” also turned up on the lobbying filings of the Dial Corporation and the Soap and Detergent Association. Just as ethanol subsidies have driven up the price of food, it turned out that fat-to-fuel subsidies boosted the cost of manufacturing soap, which is also made of animal fat. So Dial and the Soap and Detergent Association, displeased that Tyson now had somewhere else to peddle its fat, also lobbied to kill the chicken-fat diesel subsidy.
While their own interests were obvious, the soap and biodiesel lobbies argued that chicken-fat diesel was not good for the environment. But the Environmental Protection Agency ruled this month that “biodiesel or renewable diesel made from animal fat or used cooking oil results in an 80 percent reduction from carbon emissions versus petroleum diesel,” according to Darling International, a company that deals in animal-fat diesel. Darling added in its first-quarter 2009 report, “That is the highest level of carbon reduction available from any commercially ready fuel.”
Both sides claimed to be aiding the environment. Both had profits at stake. The soap side just had better lobbyists than the chicken side. When Congress rushed the massive Wall Street bailout to passage last fall, it extended many special-interest tax breaks, but it specifically killed the $1-per-gallon break for animal-product diesel, leaving chicken-fat diesel with a subsidy of only 50 cents per gallon. Big soap and big biodiesel had defeated big oil and big chicken.
Last week, Conoco and Tyson announced they were axing their joint venture, at least until the $1-per-gallon credit returns.
Maybe Congress can take a lesson from the chicken-fat story: Stopping the oceans’ rise or cleaning the air are lofty concepts, but behind closed doors, environmental policy is often driven by less ambitious motivations.