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We explore the class of trilevel equilibrium problems with a focus onenergy-environmental applications. In particular, we apply this trilevelframework to a power market model, exploring the possibilities of aninternational policymaker in reducing emissions of the system. We present twoalternative solution methods for such problems and a comparison of theresulting model sizes. The first method is based on a reformulation of thebottom-level solution set, and the second one uses strong duality. The firstapproach results in optimality conditions that are both necessary andsufficient, while the second one results in a model with fewer constraints butonly sufficient optimality conditions. Using the proposed methods, we are ableto obtain globally optimal solutions for a realistic five-node case studyrepresenting the Nordic countries and assess the impact of a carbon tax on theelectricity production portfolio.

A Prescriptive Trilevel Equilibrium Model for Optimal Emissions Pricing and Sustainable Energy Systems Development