Environmental regulation in transmission-constrained electricity markets

TitleEnvironmental regulation in transmission-constrained electricity markets
Publication TypeConference Paper
Year of Publication2009
AuthorsAnthony Papavasiliou, Yihsu Chen, Shmuel S Oren
Conference Name2009 IEEE Power & Energy Society (PES) General Meeting
Date Published07/2009
Conference LocationCalgary, Canada
ISBN Number978-1-4244-4241-6
KeywordsCERTS, electricity markets, reliability and markets, RM10-001

We discuss potential competitive effects of regulating carbon emissions in a transmission constrained electricity market. We compare two regulatory instruments, renewable portfolio standards and taxing emmissions. We derive general conclusions about impacts on prices and output on a three node network. We find that renewable portfolio standards increase the market power of nonpolluting generators whereas the tax is market-power neutral. We verify our conclusions through simulations.