A locational gaming model with CO2 emission tax and limits

This paper presents a locational (spatial) gaming model with CO2 emission and transmission capacity limits. It is developed for simulating strategic behavior of electricity producers in deregulated electricity markets. The model has multiple players, each maximizing their individual profit with a CO2 emission tax included to reflect the societal cost of environment damages caused by CO2 emission from different locations. In the paper, the multipleproducer profits are converted into a set of Lagrangian functions with power production and supply as the primary control variables, resulting in a set of unconstrained, individual profit maximization equations. The Karush-Kuhn-Tucker necessary conditions are then derived and solved simultaneously incorporating Cournot gaming strategy. Case studies show the successful application of the model.