Ethanol Waivers: Needed or Irrelevant?

Abstract

Because of the magnitude of the existing corn harvest shortfall coupled with the large ethanol mandates, policymakers face extreme uncertainties looking into the future with potentially large economic ramifications. Precisely, because neither the economic modelers nor the decision makers can foretell all of the factors affecting corn harvests and ethanol use in 2013, a waiver is a wise course of action. To be sure, a waiver may have no effect and turn out to be irrelevant. Even so, we argue that it has no downside. But if an anemic harvest rebound occurs in 2013, a waiver could avoid substantial economic dislocations in 2013 and beyond. Regulators should opt for flexibility.