Environmental Information and The Demand for Super Unleaded Petrol in the United Kingdom

This paper tests and supports the hypothesis that information provided by the media about the environmental effects of benzene had a significant impact on the demand for super unleaded petrol in the United Kingdom between 1991 and 1995, explaining in part the large drop in demand at the end of 1994. The study uses a data set, including two specially created series measuring the provision of information about lead and benzene, and the cointegration approach to estimate the relationship between demand and its potential determinants. It finds that the additional provision of information about benzene significantly reduces the demand for super unleaded. Although of an exploratory and speculative nature, the study suggests that consumers do not always free-ride from taking account of negative externalities associated with their actions and that policy-makers might use the provision of information as a complement to our substitute for other policies internalising negative externalities.