NSW'S E10 unleaded fuel mandate is a ''debacle'' and is costing the state's motorists millions, according to an international study.
The Texas Tech University research found motorists had a ''significant aversion'' to the ethanol blended product.
With the push for E10 reducing the availability of regular grade unleaded, motorists had instead flocked to the more expensive premium petrol because of concerns about E10's potential engine damage as well as fuel efficiency.
''The effect was so pronounced that premium grade gasoline became the No.1 selling grade of gasoline,'' said the report's authors Michael Noel and Travis Roach.
The mandate was a debacle which had cost motorists ''$345 million and counting'', said Professor Noel, from the university's department of economics.
That figure calculated the price difference between regular unleaded and premium.
''In 2010, one out of every three consumers forced off of regular switched to premium instead of E10,'' Professor Noel said.
''Now six out of 10 consumers are. It is costing more and more for less and less.''
While the mandate is hurting motorists, the push to premium is a win for petrol retailers.
According to the Australian Competition and Consumer Commission research, Australian fuel retailers enjoy an average profit margin of 3.69¢ a litre of premium fuel sold, compared with 1.77¢ a litre of regular unleaded petrol.
Greens MP John Kaye said the mandate was not working for consumers or the environment.
''Motorists who had been using regular unleaded have been faced with the choice of a fuel they don't want and a fuel that is much more expensive,'' Dr Kaye said.
''While per litre it [the E10 price] looks better, you have to burn more of it to cover the same distance, and you get more air pollution and more CO2 emissions.
''There's no evidence that requiring motorists to use ethanol blended fuels has any net greenhouse gas gain or much in the way of air quality improvement.''
Service Station Association senior manager Colin Long said E10 needed to be cheaper if the government wanted more people to buy it.
But the NRMA's motoring and services director Kyle Loades said motorists were switching to premium unnecessarily.
The story Mandate on ethanol fuel costs drivers dearly: study first appeared on The Sydney Morning Herald.