**Table 2:** Summary data

||**Min**|**Max**|**Mean**|**Observations**|
|---|---|---|---|---|
|**Pollution, annual concentration**(_ug/m_<sup>3</sup>)|0.10|40.40|7.30|39,885|
|**Annual Sales**|6.64|217,146,739|491,574|39,885|
|**Employees**|0|19,480.00|250.00|39,885|
|**Wages**|0|4,724,614|51,613||
|**Number of unique frms**||||1,204|
|**Periods**||||11|
|**Number of cities in 2016 above the average of**5_ug/m_<sup>3</sup>||||82|

# **5.3 Power-sector data**

The power sector in Chile is mostly privately owned, with generation, transmission, and distribution being privately run.<sup>4</sup> A comprehensive effort to make generating companies more competitive in the early 1980s resulted in significant reforms that led to the privatization of the two largest government generators (Serra, 2022). Part of the reform, as stipulated by the 1982 Electricity Law and subsequent amendments, was to ensure that electricity companies in the same area are connected in order to maintain service security and to minimize system operating costs.

The unbundling mechanism resulted in two large interconnected systems; the Central Interconnected System, which accounts for approximately 75% of the country’s power generation and serves mostly households, and the Big North Interconnected System, which serves mostly mining operations. Generators that are connected to the grid are subject to the instructions of the Independent Co-ordinator of the National Electricity System (ICNES). Generators can sell surplus electricity in the spot market at marginal cost, or the cost of production of energy by the least efficient generation facility per hour. They may also sell to private companies whose capacity exceeds 5 MW at an agreed upon price. Finally, generators can sell to distribution companies at a price determined by a public bid.<sup>5</sup> Most of Chile’s generation is provided by five producers (Jim ́enez et al., 2020). According to Article 7 of the Electricity Law, national transmission companies cannot participate in generation. Interestingly, in spite of pro-competitive laws, no large generators have entered the market (in the central system that supplies most of the electricity). This is partly due to high fixed costs, but also due to opposition from civil society organizations (Serra, 2022).<sup>6</sup> There are emissions standards in place for the maximum PM2.5 emissions from thermal plants. A clean national intervention in 2010 states that all companies need to generate electricity from a given percentage of renewables (5% in 2010 – but scaling up in subsequent years) (Jim ́enez et al., 2020).<sup>7</sup> Although regulated, thermal power units create large levels of pollution. The correlation between coal-fired power stations and pollution will be used as an instrument in what follows. Although coal-fired power plants create large amounts of pollution, the largest sources of pollution according to the Global Carbon Project in Hannah Ritchie and Rosado (2020) are oil and gas. For our instrument to be effective, the location of the power-plants should not be dependent on the economic development of the closest city. As argued earlier, there are several justifications for using the power sector as an instrument for pollution. Power stations in Chile plug into regional grids and are hence isolated from demand that is specific to cities. The location of a

> 4see `http://generadoras.cl/english` for more details.

> 5 `https://uk.practicallaw.thomsonreuters.com/w-019-3060?transitionType=Default&contextData=(sc.Default) &firstPage=true`

> 6New plants are restricted from being around residential and commercial areas. In this sense, the location of the plant is independent of a city’s economic activity. This is a function of Law 19300, which requires an environmental impact assessment.

> 7Law No. 20,257 could in principle serve as an instrument in the analysis, but would likely be negatively correlated with pollution.

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