Black Liquor Tax Credit

The devil’s in the details, especially in the Alternative Fuel Mixture Credit (AFMC).

In 2005, the AMFC was passed in the U.S. when the government said, “why yes, I would like to encourage companies to use environmentally preferable biofuels by giving them extra cash in the form of a tax credit.”

The thing is: paper companies already had a ton of biomass waste from paper production, which is called “black liquor.” Because they had so much black liquor on their hands, of course they were using it as biofuel to save themselves some money.

Following the money, like all good capitalists do, the paper industry started mixing their black liquor biofuel with diesel, just to get the tax credit. In other words: they went from being more environmentally friendly (using their self-made biofuel black liquor) to less environmentally friendly (mixing their biofuel with diesel) to get a tax credit that was supposed to encourage more environmentally-friendly fuel usage. Yeah. Money talks.

The black liquor tax credit is therefore a snarky term used to describe a loophole in the AFMC that paper companies were exploiting for billions of dollars in ironic environmental tax credits.