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Cost-benefit Analysis of Gasoline Additives & Environmental Effects

The Issue

Methyl tertiary butly ether (MTBE) was added to gasoline as an oxygenate to reduce air emissions in the state of California as well as other regions. However, lacking a comprehensive assessment of all impacts to the environment prior to adding MTBE, California is experiencing widespread contamination of groundwater and surface waters as well as formaldehyde air emissions, posing a carcinogenic threat to humans. A cost-benefit analysis was needed to evaluate the gasoline blend with MTBE versus alternatives.

What Has ANR Done?

Responding to the California State Legislature's request, through Senate Bill 521, Environmental Economist Linda Fernandez of the University of California, Riverside conducted a cost-benefit analysis, along with physical scientists who conducted environmental impact assessments, of fuel blended with MTBE. The analysis was used by the Governor to decide to ban the MTBE additive, phasing it out by 2004.

The Payoff

Study Leads to Ban of MTBE Additive in Gasoline

The cost-benefit analysis included scientific data generated from physical scientists to which valuation methods could be applied to derive monetary values of costs and benefits of environmental and economic impacts of using different fuel additives. The analysis concluded that there was no significant reductions in air emissions due to MTBE-blended fuel as compared to non-oxygenated alternatives, but that MTBE presented significant public health risks and costs associated with water contamination. The analysis, presented at two public hearings as well as in various written forms, has led to a ban of the MTBE additive.

Clientele Testimonial

See http://tsrtp.ucdavis.edu for testimony and reports.


Supporting Unit: UCR Department of Environmental Sciences

Linda Fernandez
Environmental and Resource Economist
Dept. of Environmental Sciences
UC Riverside
tel. (909)787-2955
FAX. (909)787-3993
email: linda.fernandez@ucr.edu