Department of Agricultural and Resource Economics

A careful analysis of the costs and benefits of using MTBE as a fuel oxygenate, as compared to use of its most reasonable substitutes, finds that the net private and social costs of MTBE' s alternatives are substantially higher than those of MTBE. The expected costs of future MTBE use have been revised downwards as a result of the state of California's successful program to replace and monitor underground fuel storage tanks, as well as more complete estimates of the incremental clean up costs from MTBE contamination. Moreover, as California has begun to seriously consider the logistics and costs of removing MTBE from gasoline, it has become clear that the cost of MTBE alternatives is higher than previously anticipated. In light of the information that has come to light since California's 1999 decision to phase out MTBE use by 2003, that decision may merit revisiting.