The Clean Air Act Amendments of 1990 changed the regulations for air p
ollution by replacing a set of mandated actions with a market mechanis
m for pollution rights, where electric utilities can buy or sell right
s to emit sulphur dioxide (SO2). We implemented the provisions related
to the reduction in SO2 in the National Energy Modeling System (NEMS)
to assess their impacts on energy markets. Because of the decentraliz
ed design of NEMS, the implementation was quite complex. We had to use
Lagrangian relaxation, which turned out to be more difficult than fir
st envisioned, and other techniques to arrive at a consistent equilibr
ium among the relevant energy sectors. As a result of these difficulti
es, we revised the NEMS model. This exercise illustrates that often an
organization should be ready to take a step back from what exists to
take a step forward.