Greenhouse Gas Trading: Assessing the Impacts of Alternative Allocation Mechanisms on the Electric Power Industry

The Situation

The electric power industry is one of the industries likely to be affected most by efforts to reduce climate change. In an effort to better understand the effects of domestic and international proposals, and to consider the various options available to policy-makers, EPRI commissioned a number of studies on key climate change issues.

NERA's Role

This study for the Electric Power Research Institute examines the impacts of alternative emission permit allocation mechanisms on the electric power industry. Results are developed using NERA’s linear-programming model of the U.S. electric utility sector, which simulates emissions trading between all entities in the power industry. The output reflects unit-specific data on costs, emissions, and operating characteristics. The study provides insights on trading between emissions sources, and impacts to firm profitability, consumer rates, and the level of energy services.

The Result

The reports were distributed to EPRI contributors and informed EPRI's efforts to participate in a high-level public debate on climate change policy.