Fuel Prices and Ambient Air Pollution: A Study of Sydney*

This paper explores the short‐run influence of road transport fuel prices on ambient air pollution over the period 2004–2023 for the case of Sydney, Australia. Using daily data from nine air quality monitoring stations, we find negative effects of fuel prices on ambient concentrations of several key pollutants including ozone, nitrogen dioxide and carbon monoxide, with inelastic effect sizes. Consistently significant effects are not found for sulphur dioxide or visibility impairment levels. Wind speeds, bushfire incidence and public holidays are found to be among other key factors affecting air conditions. We also explore monthly effects and the links between gasoline prices and Google relative search interest in air pollution and related terms. The findings are useful for air pollution prediction and add to understanding of the environmental benefits of fuel taxes.