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Other titles in the Hoover Institution Press Publication series:
Corn Ethanol: Who Pays? Who Benefits? (Hoover Inst Press Publication)by Ken G Glozer
Synopses & Reviews
Given the harsh economic realities that our country faces today, it is essential that its political leadership design and implement energy policies that are cost-effective, environmentally sound, and compatible with our competitive market-based economy. Unfortunately, both Congress and the White House have adopted a policy to advance the ethanol market by combining a quantitative mandate for the use of that fuel in gasoline with deep subsidies for ethanol suppliers and with other market-distorting measures. The mandate policy is known as the Renewable Fuels Standard (RFS). First passed in 2005, it imposes annual quantitative requirements on refiners and gasoline importers that they blend corn ethanol into gasoline. In 2007, the blending requirement was doubled from 7.5 billion, to 15 billion gallons annually by 2015. That mandate was in addition to deep federal subsidies for ethanol (equivalent to 45 cents per gallon) blended into gasoline and protection for domestic producers from low-cost ethanol imports (through an import fee of 54 cents per gallon and a 2.5 percent ad valorem tax). That trinity of federal intervention policies was justified by the Bush administration, the Departments of Energy and Agriculture, the Environmental Protection Agency, and corn ethanol interest groups as necessary to reduce U. S. petroleum imports and our vulnerability to import supply interruptions, high gasoline prices, greenhouse gas emissions, federal budgetary costs for corn production subsidies, and the U. S. trade deficit.
In this book, Ken Glozer presents the history, the promises, and the truth about federal corn ethanol policy. The book is based on an in-depth, fact-based evaluation of each of the major claims made by the advocates of the policy. After providing a detailed history of the policy from 1977 to the present, he examines in detail whether any of the claims made by those who advocated the current federal corn ethanol policy are true (he found only one). The policy does indeed create jobs in rural areas of the ten largest corn-producing states in the Midwest but at a very high cost to others.
The nation and its taxpayers and consumers would be far better off—nearly half a trillion dollars better off from 2008 to 2017—if the government adopted a policy of relying on competitive markets for corn ethanol and thereby avoiding the substantial costs imposed on consumers and taxpayers by the current corn ethanol policy. Nationally, consumers and taxpayers do not benefit from the policy, and local and global environments may actually be harmed. The major beneficiaries are a relatively small number of corn farms and ethanol producers concentrated in ten Midwestern states. The ethanol policy is disguised as an energy policy but is really a wealth transfer policy!
Book News Annotation:
Energy consultant Glozer was a senior executive service career professional with the White House Office of Management and Budget in the energy, environment, and agricultural areas for 26 years. His text assesses the Renewable Fuels Standard (RFS) policy adopted by the federal government in 2005, mandating the use of corn ethanol in gasoline to reduce US petroleum imports. After tracing the evolution of the federal corn ethanol policy from the Carter through Bush II administrations, Glozer critiques advocates' claims that the RFS would strengthen US energy security, benefit the environment, reduce budget costs, improve trade balance, and increase rural employment. While rural areas of ten Midwestern states have benefitted financially--thanks to decades of federal subsidies--taxpayers, consumers, and local and global governments have not. Arguing that the current policy is less about energy and more one of wealth transfer, Glozer suggests alternatives. Annotation ©2011 Book News, Inc., Portland, OR (booknews.com)
In the first decade of the twenty-first century, both the Bush and Obama administrations, along with Congress, have been enamored of an energy policy that relies on federal mandates and production subsidies to promote ethanol use as a cure-all for a host of problems. Yet the rationale for those policies does not rest on any objective empirical evidence that they work or are more effective than a policy of simply relying on competitive markets to realize our goals of energy security, economic security, and environmental quality. In this book, Ken Glozer provides a factual evaluation of the major claims made by those who have advocated an ethanol policy for the past thirty years and answers a number of important questions. When did the policy start? How did it evolve? Who were the key officials that formed and shaped the policy? And, most important for understanding the continuing support for the policy and the obstacles to reform, what were the major political and market forces that drove it?
After a detailed review of the history of the policy since 1977, the author presents the results of an evaluation of the claims made by the architects of the Renewal Fuels Standard (RFS—a mandate that requires an increasing percentage of ethanol to be blended in all gasoline sold in the United States). The RFS was first enacted in 2005 and then doubled in 2007 legislation to 15 billion gallons of corn ethanol for blending into gasoline nationwide by 2015. That mandate was in addition to an existing deep subsidy to ethanol producers of 45 cents per gallon of ethanol and trade protection against lower-cost Brazilian ethanol. His surprising findings—that federal ethanol policy has little to do with energy and everything to do with wealth transfers from consumers and taxpayers to corn and ethanol producers—is particularly compelling because, after three decades of federal subsidies, ethanol remains uneconomical even with the subsidies, trade protection, and the blending mandate. Glozer’s sobering conclusion is that taxpayers and consumers are the victims of the current policy. They have no choice but to pay and pay and receive no benefits in return.
In this in-depth, fact-based evaluation, Ken G. Glozer provides a detailed political history of how the United States ended up with current federal corn ethanol policy. Part I relates the significant external events that have driven the politics that in turn has driven the policy since 1977. He answers important questions about when the policy started, how it evolved, what were the major political and market forces that drove it, and, most important, who were the key officials that formed and shaped the policy.
Part II of the book contains an in-depth objective evaluation of the major claims made by those who have advocated the ethanol policies during the past thirty years. Glozer uses his analytic, policy evaluation skills, honed during his twenty-six years with the White House Office of Management and Budget, to probe how well the ethanol policy has worked compared to the claims made by two presidents, three federal agencies, ethanol producers, and the corn and soybean growers.
The author presents the results of an evaluation of the Renewal Fuels Standard, which was first enacted in 1975 then doubled, to a mandatory 15 billion gallons of corn ethanol blended into the nation’s gasoline supplies. His surprising finding—that federal ethanol policy has little to do with energy and everything to do with wealth transfer—is particularly compelling because, after three decades of federal subsidies, trade protection, and, most recently, mandated ethanol blending, ethanol remains uneconomical. Also, according to the Department of Energy’s Energy Information Administration, ethanol never has and never will have a significant impact on petroleum imports compared to what could be achieved under a competitive market policy. Glozer’s sobering conclusion is that the taxpayers and consumers are the victims of the current policy in that they have no choice but to pay and pay.
About the Author
Ken G. Glozer is currently president of OMB Professionals, a Washington, D. C. based energy consulting firm. He was a senior executive service career professional with the White House Office of Management and Budget in the energy, environment, and agriculture area for twenty-six years.
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