EFFICIENCY AND SUBSTITUTION IN POLLUTION-ABATEMENT

This paper examines the relative contributions of three factors to eco nomic efficiency and pollution abatement. The first is price efficienc y, achieved through the removal of unnecessary subsidies-surprisingly widespread-for polluting activities; the second, managerial ('X') effi ciency; and the third, substitution towards low-polluting practices. T he first two so-called 'win-win' options often lead to large gains in economic efficiency but to secondary effects on pollution abatement, a nd the third to large effects on pollution abatement and gains in econ omic efficiency, via the reduction of external costs. The case of elec tricity supply in developing countries is studied using a simulation m odel.