Providing reliable, affordable, clean electricity is essential for national economic performance and quality of life. A big challenge facing the electric power industry today is to meet the nation’s energy needs with the least environmental harm that results from electric power plants. The electric power industry is and will continue to be a primary focus of existing and future greenhouse gas (GHG) emission regulations. Different from other air pollutant regulations such as for sulfur dioxide (SO2) and nitrous oxides (NOx), GHG regulations have the potential to significantly affect electric power system dispatch and operations over a relatively short period, so the implications are significant enough to warrant an in-depth study. This dissertation first discusses climate change and the contribution from the electric power industry. Various climate change policies and corresponding research done in the electric power industry are presented, through which operators, planners, strategists, and investors can better understand the potential impacts of GHG regulations on the electric power industry. Then several primary power system features that will impact CO2 emissions are analyzed in this dissertation, using a simple two-bus two-generator power system. These power system features include CO2 emission factors by type of fuel used to generate power, unit thermal efficiency, regional generation mix, electricity demand, and transmission constraints. This dissertation then develops the CO2 emission-incorporated cost model, which includes a fuel cost function, CO2 emission cost function, and fuel-emission cost function. The implications of CO2 emission cost on generation dispatch related issues, such as generation cost variation and breakeven price of CO2, are studied. Based on the developed CO2 emission incorporated cost model, a powerful CO2 emission-incorporated ac optimal power flow has been formulated in this dissertation. The effects of the CO2 emission-incorporated ac optimal power flow on electric power system dispatch and operations were investigated using the standard IEEE 24-bus reliability test system through several case studies. These case studies consider situations of different fuel prices and different load levels. For each case study, a wide range of CO2 prices were modeled. Finally, in order to meet the annual CO2 emission limits economically, an integer programming based optimization methodology for implementing the proposed CO2 emission incorporated optimal power flow has been developed. The optimization methodology has been verified by various annual CO2 emission caps.