Rausser, Gordon C.; Adams, Gregory D.; Montgomery, W. David
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In the early 1990s, oxygenated gasoline was hailed as a partial solution to the nation's air quality problems. Although the large-scale use of methyl tertiary butyl ether (MTBE) as a gasoline oxygenate successfully improved air quality, it adversely impacted water quality and dramatically exposed leaking underground storage tanks. However, removing MTBE from gasoline could impose significant societal costs-in terms of both gasoline production costs and prices and possible air and water quality impacts. The analysis conducted for this report is based on a comprehensive and internally consistent cost-benefit framework and includes several cost categories largely neglected in prior MTBE analyses, including: (1) the cost to taxpayers of increased ethanol consumption; (2) increases in the cost of oil imports; (3) the effects of changes in gasoline prices on gasoline consumption and thus on automobile emissions; and (4) the potential effect of MTBE substitutes on water quality.