Do Fuel Price Hikes Clean Local Pollution? Evidence from Ambient Air Quality in Kuwait

Abstract

Purpose: This study evaluates the impact of Kuwait's 2016 gasoline price reform on ambient air quality, focusing on whether the policy has achieved the anticipated reductions in local pollution levels.
Study design/methodology/approach: The study employs three time-series Regression Discontinuity (RD) methods to assess the causal effect of the price change. The global polynomial RD approach uses a flexible time trend across a broad window. The local linear RD method narrows the focus to a short window around the reform date, capturing the immediate impacts. The two-step augmented RD technique first controls for weather and seasonal variation, then applies a localized RD model.
Sample and data: The analysis utilizes average hourly pollution data from 12 monitoring stations across Kuwait, spanning from January 2011 to December 2017. Six key local pollutants are analyzed: carbon monoxide, nitrogen oxides, nitrogen dioxide, nitric oxide, ozone, and sulfur dioxide.
Results: Contrary to expectations, the findings indicate no statistically significant improvement in ambient air quality following the price increase. Some pollutants, such as nitrogen dioxide and nitrogen oxides, exhibit increased concentrations; however, these results are not uniformly robust across models, raising concerns about potential unintended consequences.
Originality/value: This is the first study to apply high-frequency pollution data and a time-series RD design to evaluate the environmental impact of a gasoline price hike in Kuwait’s subsidized, fixed-price system.
Research limitations/implications: The results suggest price reforms alone may not suffice. Broader measures—such as infrastructure investments, urban planning reforms, and behavioral incentives—are likely needed to achieve environmental goals.