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2008-10-22 | EfD Discussion Paper

Environmental Policy, Fuel Prices, and the Switch to Natural Gas in Santiago, Chile

Coria, Jessica. 2008. “Environmental Policy, Fuel Prices, and the Switch to Natural Gas in Santiago, Chile.” EfD Discussion Paper 08.
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The author analyzes the role of environmental policies and energy cost savings in the switch to natural gas by stationary sources in Chile. There is skepticism about using market-based policies (economic instruments) in the developing world—permit trading programs versus emissions fees. This paper produces new evidence of the role of environmental regulations and market forces in a successful air-quality improvement program in Chile, a less-developed country.

According to the study’s data, most of the switching was induced by the lower cost of natural gas, although environmental policies played a small role and showed that sources were more sensitive to the cost of energy than to environmental regulation.