The Effects of Transportation Fuel Subsidies on Air Quality

The Effects of Transportation Fuel Subsidies on Air Quality

Gasoline consumption is a significant source of air pollution, a major environmental concern in urban areas, and an important issue for transportation policy. Gasoline taxes have been touted by many economists as an efficient and relatively simple tool to address environmental concerns and other problems associated with gasoline consumption. However, rather than removing subsidies and increasing gasoline taxes, many countries still subsidize gasoline, which may have the opposite effect of exacerbating the environmental concerns and other problems associated with gasoline consumption. The prevalence of gasoline subsidies worldwide and the fall in the global mean gasoline tax may increase gasoline consumption and exacerbate the air pollution associated with gasoline consumption. However, whether gasoline subsidies actually increase air pollution and the effects of gasoline subsidies on different air pollutants, empirical questions remain open and are not fully addressed in the previous literature, particularly for oil-rich countries in the Middle East and North Africa that have the lowest net taxes.

For this research, the researcher proposes to evaluate the effects of transportation fuel subsidies on air quality using economic and econometric modeling. In particular, they will analyze the impact of the Iranian energy subsidy reform on air quality using a regression discontinuity design.

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