Alternative environmental regulation schemes for the belgian power generation sector

This paper discusses the effects of alternative ways of using external cost estimates to regulate investments and generation in the electricity produc tion sector. Starting from the existing system, four alternatives are consi dered: emission taxes for the utility and for independent producers, emissi on taxes limited to the electric utility, emission permits limited to the e lectric utility and finally a system where only investments are regulated, and dispatch is not. Taking external damage estimates from the literature, these alternatives are compared using a dynamic partial equilibrium model o f the Belgian electricity market for the period 1995-2034. The efficiency a nd distribution effects of the alternative environmental policy instruments are quantified.