September 15, 2013

TAX WHAT YOU DON'T WANT:

Wall St. Exploits Ethanol Credits, and Prices Spike (GRETCHEN MORGENSON and ROBERT GEBELOFF, 9/15/.13, NY Times)

It was supposed to help clean the air, reduce dependence on foreign oil and bolster agriculture. But a little known market in ethanol credits has also become a hot new game on Wall Street.

The federal government created the market in special credits tied to ethanol eight years ago when it required refiners to mix ethanol into gasoline or buy credits from companies that do so. The idea was to push refiners to use the cleaner, renewable fuel, or force them to buy the credits.

A few worried that Wall Street would set out to exploit this young market, fears the government dismissed. But many people believe that is what happened this year when the price of the ethanol credits skyrocketed 20-fold in just six months, according to an analysis of regulatory documents and interviews with more than 40 people involved in the market, including industry executives, brokers, traders and analysts.

If you want to foster alternative energy sources you just tax the one you don't want.  Government isn't very good at picking winners, but it's excellent at choosing losers.  Raise the price of oil and let markets sort out the alternatives.

Posted by at September 15, 2013 9:16 AM
  

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