One of many problems with governmental manipulation of markets is that governments seldom anticipate ancillary consequences accurately if at all.
A seemingly sensible policy can turn out harmful in unforeseen ways.
It can seem sensible, for example, to encourage the use of waste materials in the production of energy for transportation.
Who, for example, can object to making diesel out of animal fat?
People for whom animal fat represents not waste but feedstock--that's who.
The American Cleaning Institute (ACI) is urging the Environmental Protection Agency to exempt or limit the use of animal fat in the Renewable Fuel Standards program.
Animal fat is raw material for soap, laundry detergent, fabric softeners, hard-surface cleaners, dish detergents, personal-care products, and other consumer and industrial products.
As a feedstock for US biodiesel and renewable diesel, which receive tax credits and count toward fulfillment of RFS requirements, animal fat ranks far below vegetable oil.
For the cleaning-products industry, it's far more important.
Commenting on EPA's RFS proposal for 2017, the ACI wrote, "The proposed volumes would continue to divert large quantities of a finite, inelastic supply of animal fats to the biofuels market, thereby critically disadvantaging the domestic oleochemical industry."
According to the institute, the price of animal fat has increased 95% since 2006 because of the RFS and biofuel tax incentives. Current policies, the group warned in a press release, "threaten not only the price but the availability of animal fats for oleochemical production."
Switching to palm oil from outside the US, ACI said, threatens 25,000 American jobs.
"The future of a longstanding domestic industry is at stake," the group warned EPA.
The phenomenon of concern has an analog in the fuel-ethanol part of the RFS program. Mandates raised demand for corn faster than agricultural capacity could adjust, and corn prices jumped. Inevitably, food prices jumped, too.
Governments either can't or won't account for all adjustments markets make to their incursions. They'd preclude much distress by simply leaving markets alone.
(From the subscription area of www.ogj.com, posted July 15, 2016; author's e-mail: [email protected])