Alternative Environmental Regulation Schemes for the Belgian Power Generation Sector

This paper discusses the effects of alternative waysof using external cost estimates to regulateinvestments and generation in the electricityproduction sector. Starting from the existing system,four alternatives are considered: emission taxes forthe utility and for independent producers, emissiontaxes limited to the electric utility, emissionpermits limited to the electric utility and finally asystem where only investments are regulated, anddispatch is not. Taking external damage estimates fromthe literature, these alternatives are compared usinga dynamic partial equilibrium model of the Belgianelectricity market for the period 1995–2034. Theefficiency and distribution effects of the alternativeenvironmental policy instruments are quantified.