AbstractIn an ordinary microgrid configuration, the required load changes from hour to hour. The power system firms determine the cost of energy at different times of day by considering the highest and lowest points of the consumption curve. This is referred to as time‐of‐use (TOU) pricing for power. The hourly basis load demand is divided into flexible and inflexible categories. Demand side management (DSM) lowers peak demand while rewarding customers for their participation based on load lowering. His rebuilds the whole load model on the pillars of demand cost movement. The research recommends a DSM methodology based on a combined intellect method to lower the total cost of employing loads in a microgrid (MG) structure while considering carbon tax as an unavoidable constraint to lower the emission of pollutants. This is because 40% of microgrid customers are willing to participate in the DSM scheme. The results obtained in each illustration demonstrate that the suggested DSM technique is suitable in terms of cost reduction. The generating cost was decreased from $15,488 to $15,354 when 0%–40% of clients engaged in the DSM programme. With just a 3% compromised increase in generation costs, a carbon price combined with economic emission dispatch reduced the pollutants emitted by up to 78%, from 70 to 15 tons.