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In this paper, we explore the synergies and tradeoffs between abatement of global and local pollution. We build a unique dataset of Swedish combined heat and power plants with detailed boiler-level data 2001-2009 on not only production and inputs but also on emissions of CO2 and NOx. Both pollutants are regulated by strict policies in Sweden. CO2 is subject to the European Union Emission Trading Scheme and Swedish carbon taxes; NOx—as a precursor of acid rain and eutrophication—is regulated by a heavy fee. Using a quadratic directional output distance function, we characterize changes in technical efficiency as well as patterns of substitutability in response to the policies mentioned. The fact that generating units face a trade-off between the pollutants indicates the need for policy coordination. [ABSTRACT FROM AUTHOR]

This paper analyzes the effects of the interaction between technology adoption and incomplete enforcement on the extent of violations and the rate of abatement technology adoption. We focus on price-based and quantity-based emission regulations. First, we show that in contrast to uniform taxes, under tradable emissions permits (TEPs), the fall in permit price produced by technology adoption reduces the benefits of violating the environmental regulation at the margin and leads firms to modify their compliance behavior. Moreover, when TEPs are used, the deterrent effect of the monitoring effort is reinforced by the effect that technology adoption has on the extent of violations. Second, we show that the regulator may speed up the diffusion of new technologies by increasing the stringency of the enforcement strategy in the case of TEPs while in the case of uniform taxes, the rate of adoption does not depend on the enforcement parameters. [ABSTRACT FROM AUTHOR]

Whether tradable permits are appropriate for use in transition and developing economies—given special social and cultural circumstances, such as the lack of institutions and lack of expertise with market-based policies—is much debated. We conducted interviews and surveyed a sample of firms subject to emissions trading programs in Santiago, Chile, one of the first cities outside the OECD that has implemented such trading. The information gathered allows us to study what factors affect the performance of the trading programs in practice and the challenges and advantages of applying tradable permits in less developed countries. [Copyright &y& Elsevier]