New policies are being implemented in Chile regarding energy and environment. One of the main goals for year 2050 is that at least 70% of energy is renewable (Ministerio de Energia, 2015). To reach this, a new law states that customers can connect their renewable energy generators to the grid and sell surplus to the energy distribution company at a regulated price.

Efforts to reduce air pollution, such as subsidies for energy-efficient heaters, have made little headway. The valuation of environmental amenities can contribute to the decision-making process of policymaker. A new method for the valuation of environmental amenities has recently appeared in the environmental economics literature: the Life Satisfaction Approach (LSA). LSA uses data on an individual's satisfaction with life in general as a measure of subjective wellbeing levels to value environmental amenities. A limited number of papers have applied LSA to value reductions in air pollution levels. None of these solely focused on developing countries, and there has not been an extensive theoretical analysis of the results LSA yields nor of the assumptions made and how they shape the results obtained.

1. Happiness and air pollution in Chile

Research question: What is the willingness to pay for lower levels of air pollution in a developing country?
Methodology: Data of subjective wellbeing, air pollution, climate, and individual-level survey data will be used to estimate the willingness to pay using LSA and incorporating spatial components into the econometric analysis. The project will perform a comparative analysis with respect to previous estimations available in the literature, which focus on developed countries.
Expected results: The willingness to pay likely to be heterogeneous between different regions and climate zones of Chile, and smaller in comparison to developed countries.

2. Comparing methods of environmental valuation: the case of floods in northern Chile

RQ: How do the results yielded by LSA compare to those of traditional environmental valuation methods at a theoretical and empirical level?
M: This project will meticulously describe and compare the theoretical basis on which LSA and models of revealed and stated preferences are based, with an emphasis on the assumptions made to get a willingness-to-pay expression on each approach. Empirical research will evaluate the effects that recent floods have had in a city in northern Chile. The project will estimate the average willingness to pay for a reduction on the risk of floods using each method in a comparable sample3.
ER: LSA yields different estimations of willingness to pay in comparison to models of stated preferences and revealed preferences both at a theoretical and empirical level, because it is based on a different set of assumptions than the traditional environmental valuation methods.

3. Connected to the grid: the economic benefits of net billing in Chile
RQ: What are the short-term and middle-term economic benefits of adopting a grid-connected renewable energy system for a household?
M: Analysis of the economic benefits of net billing in Chile, starting from the methodology proposed by Pillai et al. (2014), which uses temperature and solar radiation data to get the potential of energy generation, in order to estimate the economic benefits of photovoltaic panels. The project will expand this by including the effect that wind, atmospheric pressure, elevation of the location of the turbine and other factors have on potential energy generation of wind turbines.
This will compel a new methodology for the analysis of the potential economic benefits of domestic wind turbines with the use of highly-detailed geo-referenced data.
ER: Having grid-connected renewable energy systems have a small or null economic benefit on the short term, due to the initial costs, but on a longer term these costs are surpassed and there are positive economic benefits for the household.