Electricity sector restructuring and competition : lessons learned

Abstract

I explore the advantages of tradable emission permits over uniform emission standards when the regulator has incomplete information on firms₂ emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firm₂s abatement technology but neither its emissions nor its output, there are cases in which standards can lead to lower emissions and, hence, welfare dominate permits. I then empirically examine these issues using evidence from a particulate permits market in Santiago, Chile.