Subsidies intended to increase renewable fuels or displace fossil fuels most often fail. They don’t consider the consequences of the subsidy on other carbon-altering processes. I-732, on the other hand, impacts market values and costs proportional to the level of fossil emissions.
- The I-732 carbon tax motivates the market to use resources where they will displace the most emissions.
- Subsidies that single out specific uses, such as producing biofuels like ethanol, provide an incentive for the lowest-valued use of the resource.
- For instance, subsidies enable biofuel producers to outbid composite panels for the feedstock — even though composite panels and other composite materials displace far more emissions than the subsidized biofuel.
- The well-intentioned renewable fuel standards in many states result in greater use of woody biomass by utilities. At the same time, they fragment the supply source and displace investments in wood facilities that can displace greater amounts of emissions.
Image: Most of these products have to compete with subsidized biofuels for their feedstock even though they displace far more carbon emissions.