By integrating simulated annealing and the interactive best-compromise approach, a method to determine economic dispatch in power systems, while accounting for carbon emissions, is proposed in this study. To satisfy load demands and operational constraints, traditional economic dispatches are determined by minimizing total power generation costs based on the power output of the generating units in a system. In the proposed method, carbon emissions are taken into consideration. A carbon dioxide (CO <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">2</sub> ) equivalent model that accounted for the various fuel types (e.g., coal, oil, and natural gas) used in power generation was created. The correlation between power generation costs and carbon emission was determined according to CO <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">2</sub> emission equivalent tradeoff and incremental cost CO <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">2</sub> reduction curves. The proposed method was applied to the Taiwan Power Company system. The results indicated that the method was effective at determining the influence of CO <sub xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">2</sub> emissions on power generation costs during off-peak, semi-peak, and peak hours, as well as daily load demands. The system allows economic and environmental benefits to be considered simultaneously.