Facilitating emission trade within power exchange: Development of conceptual platform

Abstract

Electricity sector is one of the major contributor of emission. Hence, any policy which restricts emission level will have significant impact on its functioning. As a consequence, electricity traders will have to actively participate in emission market. What it means is that electricity traders will have to trade in two separate markets, namely power and emission (or carbon). However, to be able to derive maximum benefit, trader should be able to accurately forecast prices in either of the markets. Alternatively, we propose a new scheme where emission trading is facilitated within power exchange (PX). This not only provides single trading platform for the traders but also ensures that maximum benefit is achieved for individually as well as collectively by utilizing available carbon credits optimally.