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Tradable Permits with Incomplete Monitoring: Evidence from Santiago’s Particulate Permits Program


Type

Working Paper

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Authors

Montero, Juan-Pablo 

Abstract

I explore the advantages of tradable emission permits over uniform emission standards when the regulator has incomplete information on firms’ emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firm’s 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.

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Keywords

Imperfect monitoring, Pollution markets, Permits

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Publisher

Faculty of Economics

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