Center for the Study of Energy Markets

This paper examines the effects of U.S. gasoline content regulations on groundlevel ozone pollution. These regulations are costly and have been shown to fragment gasoline markets and raise prices paid by consumers. We provide the first comprehensive empirical estimates of the regulations’ air quality benefits. We exploit the fact that gasoline regulations vary by time and place of introduction, using both difference-in-difference and regression discontinuity designs. We show that federal regulations targeting the emissions of volatile organic compounds (VOCs), one of the two main precursors to ozone, do not substantially improve air quality. This outcome is driven by the response of refiners to the regulation: minimizing the cost of abatement involves removing a type of VOC from gasoline that is not an important determinant of ozone pollution. In California, however, we show that precisely targeted regulations requiring the removal of VOCs particularly prone to forming ozone caused a significant improvement in air quality.