Power System Alberto Gelmini*, Michele Benini*, Marco Borgarello* EEM08 5th International Conference European Electricity Market Lisbona, 28-30 Maggio 2008 * CESI RICERCA Aim of the paper is to assess, by means of a scenario analysis, the effectiveness and costs of different actions to reduce CO2 emissions in the Italian power system, i.e. increase of the efficiency of both fossil and renewable generation technologies, use of carbon capture and storage technologies, development of renewable energy sources through the implementation of incentive schemes and increase of the efficiency in electricity end-uses. The study shows that all the actions taken into account are not sufficient to achieve the CO2 emissions target hypothesized for 2020. Only high penalties on CO2 emissions, such as the ones deriving from the application of an additional carbon tax, causing a complete switch from coal to gas (with a consequent hardly acceptable dependency on natural gas), could reduce the distance from the target to an amount that could reasonably be covered by the Kyoto protocol flexible mechanisms.