Reducing CO2 Emissions on the Electric Grid through a Carbon Disincentive Policy

by Stephanie Oehler

While energy production is widely acknowledged as a significant contributor to climate change, there is a discrepancy in opinion about what the most effective solution is to cut back on emissions. The most commonly addressed method of bringing about a smart grid is through new technologies that have the potential to improve distribution efficiency, encourage demand side management behaviors, and reduce the emissions associated with the production process. Policy change, however, is another route that has the potential to be more efficient in reducing emissions in the short term as technological developments are in progress. Li et al. (2013) examined the potential of several types of policy initiatives to modify electricity operator behavior in order to reduce CO2 emissions while continuing to meet energy demand. Basing their assumptions on the energy profile of Michigan, the authors created three models to represent different policy approaches: the first served as a baseline and represented the present energy cost and load distribution, the second imposed demand-side financial penalties for CO2 emissions, and the third created a carbon disincentive that produced a new pricing scheme for energy sources in terms of emissions. Continue reading