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.

The author looks at the effects of the choice between taxes and permits on the pattern of adoption of a new emissions abatement technology. The regulator determines the optimal ex-post amount of emissions before firms start to adopt the technology. Each firm decides when to adopt, considering benefits, costs, and advantage gained over their rivals, producing a sequence of adoption that is “diffused” into the industry over time.

Public disclosure programs that collect and disseminate information about firms’ environmental performance are increasingly popular in both developed and developing countries. Yet little is known about whether they actually improve environmental performance, particularly in the latter setting.

The authors use detailed plant-level survey data to evaluate the impact of India’s Green Rating Project (GRP) on the environmental performance of the country’s largest pulp and paper plants.