Fresh off the heels of the supply-chain crisis from last holiday season that resulted in empty shelves and barren grocery aisles, America is approaching another holiday season with a potential crisis on the horizon — a potential crisis inflamed by poor policy choices by leaders in Washington.
At a time of rapid inflation, with consumer prices rising more than 7% on just about everything from milk to bread, one ill-thought-out policy will likely ensure those prices continue increasing. The recently passed Inflation Reduction Act included special tax credits for alternative transportation fuels that favor sustainable aviation fuel (SAF) over other alternative fuels, creating an imbalance that has serious ramifications for retailers and consumers for years to come.
By choosing to play favorites and pit biofuels against one another, Congress and the administration gave special treatment to SAF with a preferential tax credit 40% higher than other alternative transportation fuels.
This is problematic because SAF and alternative transportation fuels compete for the same production ingredients. By making it more profitable for biofuel producers to develop SAF instead of biodiesel and other alternative fuels, policymakers have decided to reduce the supply of biofuels available for America’s trucking fleet. And when supply goes down, but demand stays the same or increases, prices go up. It’s simply the law of supply and demand.
The effect of this preferential treatment could be widespread across the economy. The trucking industry, which delivers more than 80% of all consumer goods, relies on biofuels to fuel their vehicles and make their deliveries.
When it costs more to fuel the trucks and vehicles that deliver our goods, those higher prices will be passed through to consumers. With our nation already struggling with rising inflation, the preferential treatment that raises the cost of biodiesel only exacerbates these economic problems.
The special tax incentives given to airlines by Congress are especially troublesome because airlines pushed the measure to highlight environmental gains to their shareholders — not to benefit their customers. Meanwhile, while airlines worked behind the scenes to pass SAF tax credits, their fares increased by 42.9%.
Their customers aren’t just paying more to fly. Families across America are already trying to find a way to afford the most expensive holiday season in decades. From the increased shipping cost to the skyrocketing prices of pantry staples, this year is shaping up to be the costliest holiday season on record.
American consumers are stuck picking up the increased tab of government favoritism. When the government picks winners and losers, one guarantee is that consumers and businesses will be sent to the loser column.
There’s more than just economics at stake. Not only is pitting biofuels against one another harmful economically but it’s also harmful to the environment. Renewable diesel and biodiesel are important in reducing greenhouse gas emissions and are critical tools to fight climate change. Having a level playing field is, of course, good for business and consumers, but it’s also good for the air we breathe and reducing the overall carbon footprint of the transportation industry.
With our country at a political and economic crossroads, our elected officials should do all they can to alleviate the economic burdens faced by millions of consumers and businesses from coast to coast. Fostering an environment that benefits Americans, breeds economic success and supports stability for our businesses should be a priority for Congress — regardless of which party is in charge.
Stopping picking winners and losers and bringing equal treatment to all alternative fuels is one meaningful step to helping ease the financial burden on consumers and small businesses and lower costs across the board.
Carlos Solorzano-Cuadra is the CEO of the Hispanic Chamber of Commerce of San Francisco. He wrote this for InsideSources.com.