Corn Ethanol Who Pays? Who Benefits?

1. Corn Ethanol Who Pays? Who Benefits? By Ken G. Glozer Former White House OMB, SES Career Official Currently, President, OMB Professionals, Inc. Washington D.C. Consulting Firm kglozer@ombpros.com March 2011

2. I. Basic Questions About the Book? • Why was it researched and written ? • What content does it contain? • Why is the content relevant today? • Who is the intended audience? • How long did it take to complete?

3. Political History (Part I of Book)Taking Full Advantage of Rising Oil Prices! • Carter Administration; • Reagan Administration; • Bush I Administration; • Clinton Administration; • Bush II Administration; and • Obama Administration

4. III. Evaluation (Part 2 of book) Of Ethanol Policy Advocates’ Claims! • Is US energy security strengthened; are US petroleum imports reduced? • Is the environment improved? • Are federal budget costs reduced? • Is the US balance of payments deficit improved? and • Is rural employment increased?

5. III. Evaluation Continued --Energy Security • US petroleum imports are not significantly reduced! • US energy security is not improved; and • Domestic corn/ethanol production is not reliable due to weather uncertainty!

9. III. Evaluation Continued--Improve the Environment! • GHG emissions compared to gasoline are not reduced; • Vehicle tailpipe emissions both increase and decrease depending on the pollutant; • Corn production and ethanol plants consume enormous amounts of water; • Corn production is a heavy polluter of waterways due to runoff contributing to dead zone (hypoxia) over major area-- Gulf of Mexico; and • Overall, environment is degraded not improved.

11. III. Evaluation Continued—Are Federal Budget Costs Reduced? • Federal budget costs are estimated to increase substantially under current corn ethanol policy; • Main reasons; corn, soybean producer subsidies were reduced but not as much as claimed in the farm bill; and • The cost of 45 cent per gallon tax credit for the higher mandated ethanol volumes results in the tax subsidy cost tripling as compared to the period 1995-2006.

13. III. Evaluation Continued--Is BOP Deficit Reduced? • No because petroleum imports are not reduced.

14. III. Evaluation Continued--Is Rural Employment Increased? • Yes, in the ten Midwestern states that produce over 80% of US corn and ethanol production

16. IV. Who Pays for the Policy? • Two to three hundred million federal taxpayers and food and gasoline consumers located throughout the U.S.; and • The estimated cost is over one half trillion dollars from 2008-2017. These costs include an estimated $143.0 billion in increased taxpayer costs and an estimated $363.7 in consumers costs.

18. V. Who Benefits? • Corn and soybean producers; • Owners of corn and soybean farmland; • Ethanol plant owners and workers; and • Petroleum refiners and importers.

24. VI. Conclusions • Corn ethanol advocate’s claim are not true except for rural employment in the 10 Midwestern states; • Current policy is costly—over one-half trillion $$$ from 2008-2017; and • Current policy is a wealth transfer policy masquerading as an energy policy!

25. VII. Recommendations • Let the 45 cent per gallon tax credit expire the end of this year---2011. • Let the 54 cent per gallon import fee and 2.5% ad valorem tax expire the end of this year. • Eliminate the quantitative mandate! • Rely on the competitive market!