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A Market-Based Environmental Policy Experiment in Chile

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Author Info
Montero, Juan-Pablo
Sanchez, Jose Miguel
Katz, Ricardo

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Abstract

We evaluate the performance of an environmental market in a less developed country on the basis of the experiences of the particulate matter control program of Santiago, Chile. We find that grandfathering the permits has created economic incentives for incumbent sources to more readily declare their (historic) emissions in order to claim any permits. In addition, the market has not fully developed because of transaction costs, regulatory uncertainty, and incomplete enforcement. Nonetheless, it has provided sources with the flexibility to adapt to new market conditions. Our analysis of this particular experience indicates that market-based policies can provide important advantages over traditional command-and-control policies even under limited institutional capabilities. Copyright 2002 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 45 (2002)
Issue (Month): 1 (April)
Pages: 267-87
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlawec:v:45:y:2002:i:1:p:267-87

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Schmalensee, Richard, et al, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer. [Downloadable!] (restricted)
  2. Hahn, Robert W., 1982. "Market Power and Transferable Property Rights," Working Papers 402, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
  3. Oates, Wallace E & Portney, Paul R & McGartland, Albert M, 1989. "The Net Benefits of Incentive-Based Regulation: A Case Study of Environmental Standard Setting," American Economic Review, American Economic Association, vol. 79(5), pages 1233-42, December. [Downloadable!] (restricted)
  4. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring. [Downloadable!] (restricted)
  5. Ellerman, A. Denny & Montero, Juan-Pablo, 1998. "The Declining Trend in Sulfur Dioxide Emissions: Implications for Allowance Prices," Journal of Environmental Economics and Management, Elsevier, vol. 36(1), pages 26-45, July. [Downloadable!] (restricted)
  6. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September. [Downloadable!] (restricted)
  7. Montero, Juan-Pablo, 1998. "Marketable pollution permits with uncertainty and transaction costs," Resource and Energy Economics, Elsevier, vol. 20(1), pages 27-50, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Enrique Calfucura & Jessica Coria & José Miguel Sánchez, 2008. "Permisos Transables de Emisión en Chile: Lecciones, Desafíos y Oportunidades para Países en Desarrollo," Documentos de Trabajo 347, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  2. Stavins, Robert, 2003. "Market-Based Environmental Policies: What Can We Learn from U.S. Experience and Related Research?," Working Paper Series rwp03-031, Harvard University, John F. Kennedy School of Government. [Downloadable!]
    Other versions:
  3. Kim, Hwa Nyeon & Woodward, Richard T. & Griffin, Wade L., 2005. "Transferable Rights of Recreational Fishery: An Application to Red Snapper Fishery in the Gulf of Mexico," 2005 Annual meeting, July 24-27, Providence, RI 19261, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  4. Raúl O´Ryan & José Miguel Sánchez, 2002. "Comparing the Net Benefits of Incentive Based and Command and Control Regulations in a Developing Context: the Case of Santiago, Chile," Documentos de Trabajo 221, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
    Other versions:
  5. Coria, Jessica & Sterner, Thomas, 2008. "Tradable Permits in Developing Countries: Evidence from Air Pollution in Santiago, Chile," Discussion Papers dp-08-51, Resources For the Future. [Downloadable!]
    Other versions:
  6. John K. Stranlund, 2006. "The Regulatory Choice of Noncompliance in Emissions Trading Programs," Working Papers 2006-7, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
    Other versions:
  7. Juan-Pablo Montero, 2004. "Markets for environmental protection: design and performance incomplete enforcement," Estudios de Economia, University of Chile, Department of Economics, vol. 31(1 Year 20), pages 79-99, June. [Downloadable!]
  8. James J. Murphy & John K. Stranlund, 2005. "A Laboratory Investigation of Compliance Behavior under Tradable Emissions Rights: Implications for Targeted Enforcement," Working Papers 2005-1, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
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  9. Montero, J-P., 2004. "Pollution Markets with Imperfectly Observed Emissions," Cambridge Working Papers in Economics 0456, Faculty of Economics, University of Cambridge. [Downloadable!]
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  10. Evans, David A. & Kruger, Joseph A., 2006. "Taking up the Slack: Lessons from a Cap-and-Trade Program in Chicago," Discussion Papers dp-06-36, Resources For the Future. [Downloadable!]
  11. Cara Inés Villegas & Carlos Chávez, 2004. "Costos de Cumplimiento y Poder de Mercado: Aplicación al Programa de Compensación de Emisiones de Santiago," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(122), pages 91-123. [Downloadable!]
  12. Arguedas, Carmen & Camacho, Eva & Zofío, José Luis, 2009. "Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance," Working Papers in Economic Theory 2009/03, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  13. Montero, J-P., 2004. "Tradable Permits with Incomplete Monitoring: Evidence from Santiago’s Particulate Permits Program," Cambridge Working Papers in Economics 0457, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  14. Juan Pablo Montero & Luis Cifuentes & Felipe Soto, 2000. "Participación voluntaria en políticas internacionales de cambio climático: implicancias para Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 27(1 Year 20), pages 69-93, June. [Downloadable!]
  15. Juan Pablo Montero, 2009. "Market Power in Pollution Permit Markets," Documentos de Trabajo 355, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  16. Juan Pablo Montero, 2002. "Trading Quasi-emission Permits.Vers. 6/2003," Documentos de Trabajo 201, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  17. Juan Pablo Montero, 2004. "Markets for Environmental Protection; Desing and Performance," Documentos de Trabajo 269, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
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