Generation Companies’ behavior in presence of an emission trading scheme

In order to comply with limits on greenhouse emissions imposed by Kyoto Protocol, in the outline of an Emission Trading Scheme (ETS), many countries have developed Emission Allocation Plans. Various industrial settlements are involved in the mechanism, and, in particular, electric power plants play the most significant role in the emission policy. The operation of electricity generation companies can be notably affected by the presence of such a mechanism. In this work, an analytical method is carried out in order to analyse the mid-term behaviour of electricity generation companies when an Emission Trading Scheme is implemented, by means of an allocation plan. The proposed model is applied to the Italian electrical system.