In this paper we describe a case study for Sri Lanka that explores a wide range of options for reducing greenhouse gas (GHG) emissions. Options range from renewable technologies to carbon taxes and transportation sector initiatives. Wefind that setting electricity prices to reflect long-run marginal cost has a significant beneficial impact on the environment, and the expected benefits predicted on theoretical grounds are confirmed by the empirical results. Pricing reform also has a much broader impact than physical approaches to demand side management, although several options such as compact fluorescent lighting appear to have great potential. Options to reduce GHG emissions are limited as Sri Lanka lacks natural gas, and nuclear power is not practical until the system reaches a much larger size. Building the few remaining large hydro facilities would significantly reduce GHG emissions, but these would require costly resettlement programs. Given the inevitability for fossil-fuelbaseloadgeneration, both clean coal technologies such as pressurized fluidized bed combustion, as well as steam-cycle residual oilfueled plants merit consideration as alternatives to the conventional pulverized coal-fired plants currently being considered-Transportation sector measures necessary to ameliorate local urban air pollution problems, such as vehicle inspection and maintenance programs, also bring about significant reductions of GHG emissions.
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