This paper describes an interdisciplinary approach to computer modeling of large-scale power systems.  System  dynamics is used to represent the  the feedback relationships which govern the long-term evolution of the system, while  engineering methods are used to calculate the short-term prices and power flows in the transmission network. This approach has been implemented in a model of the WECC, the Western Electricity Coordinating Council.  The paper uses the WECC model to simulate the impact of the carbon allowances market envsioned by the Climate Stewardship Act of 2003.   The simulations indicate that the western electricity system could achieve dramatic reductions in carbon emissions over the next two decades.  The preliminary results indicate that the large reduction could be achieved with only half the increase in retail electricity rates that have been predicted for the nation as a whole.