Electricity and Markets

R. Green
2005 Oxford review of economic policy  
Over the last fifteen years, an increasing number of electricity industries have replaced vertical integration with markets as the main method of organising production. Electrical energy is traded in many European and US markets, while the US also has markets for generating capacity. US generators can reduce the cost of complying with environmental regulations by trading emissions of sulphur dioxide, while Europe has just started a carbon dioxide emissions trading scheme. This article discusses
more » ... the way in which these markets put economic principles into practice. In particular, it shows that several different market designs can provide theoretically equivalent incentives for generators to build capacity, and that emissions trading may have unexpected impacts upon electricity prices.
doi:10.1093/oxrep/gri004 fatcat:5tdc3ywd4zamzfatdcplyjgin4