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In deregulated electricity sector climates, such as in Ontario, the production of clean or renewable energy by small power producers through distributed generation (DG) is encouraged. This paper examines the policies that can be used to encourage DG investment and incorporates them into a mathematical model. This model is then used to create scenarios for examining the economic and environmental supply-side effects of policies to a distribution system over a ten-year period. The policies analyzed include a combination of feed-in-tariffs, CO2 tax, and cap-and-trade schemes. The results are discussed in the context of the Ontario market and its Standard Offer Program, implemented on a 32-bus radial distribution system.