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.
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