Simulating the Impact of a Carbon Market on the Electricity System in the Western U.S.A

This paper describes a computer simulation analysis of a cap and trade market to control carbon emissions in the western electricity system. The simulations indicate that a carbon market could lead to dramatic reductions in carbon emissions over the next two decades. The reduced emissions can be achieved with only half the increase in retail electricity rates that have been predicted for the nation as a whole. The paper concludes with some implications of these results to state and national policy makers. This analysis is the first major application of a new approach to computer modeling of large-scale power systems. The approach is an interdisciplinary combination of system dynamics and engineering methods. This approach has been implemented in a model of the WECC, the Western Electricity Coordinating Council. The methods and assumptions of the WECC model are explained in the appendicies to the paper.