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Handbook of CO₂ in Power Systems pp 33–52Cite as

Greenhouse Gas Emissions Trading in the Electricity Sector: Model Formulation and Case Studies

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Abstract

Models formulated as complementarity problems have been applied previously to assess the potential for market power and costs of environmental regulation in transmission-constrained electricity markets. One emerging use of these models is to study the impacts of cap-and-trade (C&T) policies on electricity markets. In this chapter, we first summarize the theoretical background on the choice of environmental instruments to regulate emissions from the power sector. The chapter then presents a mathematical formulation of a power market that incorporates a carbon dioxide C&T program. We illustrate the capability of the model by presenting the results from two analyses. The first analysis examines the impact of the European Union Emissions Trading Scheme (EU ETS) on the northwestern European electricity market. The second study investigates the energy and emissions implications of Maryland’s decision to join the Regional Greenhouse Gas Initiative (RGGI) by nesting a regional power sector model within a national model. In both cases, the larger firms in the electric market are modeled as Cournot oligopolists who pursue a quantity strategy while at the same time they act competitively in the C&T programs and transmission markets. We demonstrate how complementarity-based power market models can be easily modified to incorporate details of alternative policy designs.

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Author information

Authors and Affiliations

  1. School of Social Sciences, Humanities and Arts and School of Engineering, Sierra Nevada Research Institute, University of California, Merced, 5200 N. Lake Rd., Merced, CA, 95340, USA

    Yihsu Chen

  2. ECORYS Research and Consulting, Buklum Sokak No: 63/73, Kavaklidere, 06680, Ankara, Turkey

    Wietze Lise

  3. Energy Research Centre of the Netherlands (ECN), Radarweg 60, 1043 NT, Amsterdam, Netherlands

    Jos Sijm

  4. Department of Geography and Environmental Engineering, Whiting School of Engineering, The Johns Hopkins University, 3400 N. Charles St., Baltimore, MD, 21218, USA

    Benjamin F. Hobbs

Authors
  1. Yihsu Chen
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  2. Wietze Lise
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  3. Jos Sijm
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  4. Benjamin F. Hobbs
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Corresponding author

Correspondence to Yihsu Chen .

Editor information

Editors and Affiliations

  1. , Department of Industrial & Management Sy, West Virginia University, Evansdale Drive 401, Morgantown, 26506-6070, West Virginia, USA

    Qipeng P. Zheng

  2. , Division of Economics and Business, Colorado School of Mines, 15th Street 816, Golden, 80401, Colorado, USA

    Steffen Rebennack

  3. , Department of Industrial & Systems Engin, University of Florida, Weil Hall 401, Gainesville, 32611, Florida, USA

    Panos M. Pardalos

  4. Rio Praia de Botafogo, Centro Empresarial, -A-Botafogo 2281701, Rio de Janeiro, 22250-040, Rio de Janeiro, Brazil

    Mario V. F. Pereira

  5. Research & Development, EnerCoRD - Energy Consulting,, Plastira Street 4, Athens, 171 21, Greece

    Niko A. Iliadis

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Chen, Y., Lise, W., Sijm, J., Hobbs, B.F. (2012). Greenhouse Gas Emissions Trading in the Electricity Sector: Model Formulation and Case Studies. In: Zheng, Q., Rebennack, S., Pardalos, P., Pereira, M., Iliadis, N. (eds) Handbook of CO₂ in Power Systems. Energy Systems. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-27431-2_3

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  • DOI: https://doi.org/10.1007/978-3-642-27431-2_3

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-642-27430-5

  • Online ISBN: 978-3-642-27431-2

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