Ethanol-Blended Gasoline Policy and Ozone Pollution in São Paulo

We examine four discontinuities in the ethanol content in blended gasoline fuel, mandated by Brazil's central government over the period 2010 to 2013, to test the joint hypotheses that (1) atmospheric ozone production in the São Paulo metropolitan area is limited by the volume and reactivity of volatile organic compounds ("VOC-limited"), and (2) increased ethanol use in the gasoline-ethanol vehicle fleet leads to higher ozone concentrations in urban São Paulo's ambient air. We adopt a regression discontinuity design (RDD) and flexibly test each discontinuity separately. Our finding that ozone levels actually increased with ethanol penetration on each of the four occasions is consistent with a recent empirical study that used different identifying variation, and contrasts with a modeling study of São Paulo's atmosphere that predicted significant ozone abatement from hypothetical ethanol use. We find no significant relationship between ethanol versus gasoline use and PM2.5 levels. Current tailpipe emissions standards prescribe the exclusion of the mass of unburned ethanol that is emitted --- our result suggests that this standard be reviewed. Following decades of VOC emissions control, urban areas in the US and elsewhere that are currently VOC-limited may see ozone levels rise if and when they adopt mid-level ethanol gasoline blends, whether to meet the Renewable Fuel Standard or Intended Nationally Determined Contributions to abating fossil-fuel emissions agreed upon at COP-21 in Paris