Regulated and unregulated substitutes: Aversion effects of an ethanol mandate

One approach for handling more aggressive goals under an ethanol mandate is to use a "dual blend" mandate in which both the preferred new ethanol blend and the old (possibly ethanol-free) blend of gasoline coexist. Highlighting the case of New South Wales, Australia, we show the dual nature of such a mandate can potentially lead to significant costs when consumers are averse. We show consumers en masse rejected the new blend and paid 43 cents per gallon more to avoid it. Not even the second of the mandate's four targets could be reached, and the consumer cost was substantial.