Assessment of emission trading impacts on competitive electricity market price

Purpose - Besides organizational changes in the electricity supply industry there are growing concerns about environmental issues derived from the Kyoto Protocol for the reduction of greenhouse gas emissions as well as promoting renewable energies. The purpose of this paper is to address the source side emission trading impact on electricity prices in the competitive power market.

Design/methodology/approach - Various schemes are suggested and are being implemented to achieve this objective. It is expected that electricity price will increase due to imposition of emission taxes. This paper analyzes the impact of electricity prices in the competitive electricity markets having a uniform market clearing price mechanism.

Findings - It is found that the electricity prices depend on the system loading, generation mix, etc. at a particular hour. Various emission trading instruments are discussed with a special emphasis on the European market. Research limitations/implications - Block bidding of the suppliers is considered whereas the demand is assumed to be inelastic.

Originality/value - The emission trading impacts are analyzed on a simple example.