The Price of a Shaving

The distorting effects of subsidies don’t get much more clear than this:

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good — driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation’s dependence on oil by using organic materials to create biofuels.

In a matter of months, the Biomass Crop Assistance Program — a small provision tucked into the 2008 farm bill — has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation’s composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

In the article, I didn’t find much handwringing on behalf of people who buy cabinets, especially low-income people who tend toward buying lower-quality cabinets made out of wood shavings. The concerns instead were from people like Senator Tom Harkin on behalf of the biomass industry:

“My bottom line is we have to examine those rules and make sure the payments incentivize the use of new, additional biomass for energy,” Harkin said, “which is the objective Congress intends and wrote in the law.”

It’s not quite “Let them eat cake.” It’s more like, “Let them use cinderblocks and two-by-fours.”