US subsidies for black liquer distort international competition

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In addition, the US pulp and paper industry’s eligibility for the Cellulosic Biofuel Producer Credit and the Biomass Crop Assistance Program is not granted.

US pulp and paper industry benefiting from a disproportionate tax credit scheme

Since the beginning of 2009, US pulp and paper companies have been able to benefit from an unintended and disproportionate Fuel Tax Credit scheme, which allows grants of $0.5 per gallon to alternative fuel mixture use – black liquor (a by-product from chemical pulp production) mixed with regular diesel in the case of pulp and paper industry.

As a result, and according to available information, about $4 billion have already been received by companies in the US, and this is estimated to reach between $7 and $8 billion by the end of 2009.

This subsidy has been granted to the US pulp and paper industry without any additional environmental benefit being introduced, as burning black liquor has been common practice for decades.

A number of other renewable energy programs in the US have also been identified as possible sources of subsidies for the US pulp and paper industry

Although financial support for pulp and paper companies for promoting renewable energies is being implemented in a number of countries, including EU Member States, the level of magnitude of similar programs in the US is disrupting the global level playing field and distorting competition around the world.

The Cellulosic Biofuel Producer Credit subsidy could potentially represent between $25 and 50 billion additional tax benefits by 2012 for pulp and paper producers in the US.

Like the Fuel Tax Credit, the Cellulosic Biofuel Producer Credit would dramatically and durably distort world competition on the pulp and paper markets.

The subsidising to a disproportionate level of that sector through such schemes in the US or in any pulp and paper producing country could lead to an escalation of public spending throughout the world with no additional benefit for the environment and serious consequences to global trade.

More information: Riku Eksymä, Director for EU affairs, Finnish Forest Industries Federation