ENVIRONMENTAL POLICIES AND THEIR EFFECTS ON UTILITY PLANNING AND OPERATIONS

We present a taxonomy and analysis of public policies that address the environmental impacts of power production. The paper consists of two parts. The first is a classification of policy options, including comm and-and-control regulations, emission caps, taxes, marketable permits, emission adders, and environmental performance standards along with a review of recent developments. Examples are drawn from U.S. instituti ons, but the principles involved apply to environmental regulation in any nation. In the second part, we explore how various policies can af fect a utility's choice from among emission dispatch, fuel switching, and resource options. Some policies yield inefficient outcomes: i.e., strategies for which there exist alternatives that would result in bot h lower emissions and costs. Other policies are more likely to motivat e the utility to choose efficient strategies, which generally involve a mix of DSM, investments in clean capacity, and emissions dispatch. S ome policies which appear to be very different, such as emission allow ances, taxes, and environmental performance standards, can yield simil ar-and efficient-outcomes.