Abstract for: Effect of the emissions-mitigation policy on the electricity sector

The effects of greenhouse gases on climate variation set policy challenges for the energy industry the largest greenhouse gas contributor worldwide. In this context, major markets are conducting reforms with a focus on the environment, internalizing emission costs and promoting cleaner technologies. To overcome the challenges posed by the emission of greenhouse gases (GHGs), governments have implemented mitigation policies in the power supply industries. One of the most commonly used forms of policy is the economic and financial incentive; however such incentives generate impacts on electricity prices and consumer behaviour. Most recent research on these issues has focused on the supply side, while there has been little highlighting the demand side and very little research integrating both. This paper studies the effects that these policies generate for prices and demand, through an integrated demand and supply analysis. Results indicate that an emission reduction policy, from an integrated supply and demand perspective, has a significant effect on electricity prices and, consequently, on demand. The internalization of emission costs generates increases in electricity prices and more efficient consumption, which is perceived by the decline of electricity demand in the long run. Furthermore, this structured modelling of policy helps to explain how the ultimate intended goal might be achieved: sustainable emissions reduction