This paper investigates strategies to reduce CO2 emissions from the electricity sector, In particular, it explores possibilities on the supply side and the significance of demand-side changes, It uses an economic engineering model for electricity generation capacity expansion which combines stochastic simulation for production-cost calculations and dynamic programming for selecting the optimum expansion plan, The model is used to investigate optimal strategies for stabilizing CO2 emissions from the electricity sector in Greece; these accounted for 50% of CO2 emissions produced in the country in 1990, It is also used to estimate the optimal tax required to achieve the optimal strategy for controlling CO2 emissions to the desired level,