Implications of CO2 prices on the generation capacity expansion in the Italian electricity market

The European Union Emissions Trading Scheme (EU ETS) is one of the policies introduced across the European Union (EU) to help to meet its greenhouse gas emissions target under the Kyoto Protocol. The prices of CO₂ that emerge from the EU ETS would bring significant implications in the electricity industry in Europe, which would be interesting to examine. This paper presents an oligopolistic Generation Expansion Planning (GEP) model for analyzing the possible long term impacts of CO₂ prices that emerge from the EU ETS on the Italian electricity market. The electricity market is modeled using a Cournot approach.