Does ethanol-blended gasoline policy improve air quality in China?

Ethanol-blended gasoline has been increasingly adopted worldwide as a strategy to address pressing concerns related to energy security and air pollution. This study focuses on exploring how the pilot policy of promoting ethanol-blended gasoline for vehicles affects air quality. Using a panel dataset comprising daily air quality measurements spanning the period 2016–2020, we employ a staggered difference-in-difference (DID) approach to investigate the impact of this policy. The results reveal a significant improvement in air quality after the implementation of ethanol-blended gasoline policy. On average, the air quality index experiences a reduction of 9.71 units, accompanied by decreases in the concentrations of PM2.5, PM10, CO, and NO2 by 9.15 μg/m3, 10.28 μg/m3, 0.14 mg/m3, and 2.17 μg/m3, respectively. These findings remain consistent across a range of robustness checks. The heterogeneity analysis further indicates that cities with larger populations and more congested traffic observe a more pronounced improvement in air quality due to the implementation of ethanol-blended gasoline policy. Moreover, the cost-benefit analysis demonstrates that the estimated health benefits derived from the adoption of ethanol-blended gasoline, amounting to 12.73 billion yuan, outweigh the associated costs incurred by the policy implementation. The findings provide compelling evidence that supports the promising role of ethanol-blended gasoline policy in enhancing air quality and highlight the potential benefits of such a policy in addressing the challenges posed by air pollution.