How Do China’s Electricity and Carbon Markets Interact?

Luyao Wang; Zishuo Xu; Xiangtao Long; Ruoqi Zhang; Yuwei Cao; Qing Yang; Jianjun Xiao; Wenchuan Meng; Zaimin Yang

doi:10.2991/978-94-6463-708-3_41

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How Do China’s Electricity and Carbon Markets Interact?

Authors

Luyao Wang¹^{, 3}, Zishuo Xu¹^{, 3}, Xiangtao Long¹^{, 3}, Ruoqi Zhang¹^{, 3}, Yuwei Cao²^{, 3}, Qing Yang¹^{, 2}^{, 3}^{, *}, Jianjun Xiao³^{, 4}, Wenchuan Meng³^{, 4}, Zaimin Yang³^{, 4}^{, 5}

¹China-EU Institute for Clean and Renewable Energy, Huazhong University of Science and Technology, Wuhan, 430074, China

²School of Energy and Power Engineering, Huazhong University of Science and Technology, Wuhan, 430074, China

³College of Chemistry and Chemical Engineering, Hubei University, Wuhan, 430062, People’s Republic of China

⁴Energy Development Research Institute, China Southern Power Grid, Guangzhou, Guangdong, China

⁵College of Electrical Engineering, Zhejiang University, Zhejiang, China

^*Corresponding author. Email: qyang@hust.edu.cn

Corresponding Author

Qing Yang

Available Online 9 May 2025.

DOI: 10.2991/978-94-6463-708-3_41 How to use a DOI?
Keywords: Electricity market; Carbon market; System Dynamics
Abstract: Under China’s dual strategic goals of “carbon peak in 2030 and carbon neutral in 2060”, the carbon market and electricity market play important roles. The national carbon emission allowance (CEA) market has been launched, and the road map for the development of a unified national electricity market has been clarified. This has a profound impact on the energy and electricity industry, and there is an urgent need for in-depth research on the coupling mechanism and coordinated development of the electricity market and carbon market. This article adopts the system dynamics (SD) method to design and simulate the coupling mechanism between two markets, and analyzes the market coupling effect and performance under different carbon emission levels and carbon reduction policy intensities. The results show that (1) the carbon market affects the profitability of power generation enterprises through the cost of carbon emission reduction, and the carbon price signal can be effectively transmitted to the electricity market. (2) The electricity market is not as sensitive to the intensity of carbon reduction policies as the CEA market. (3) The higher the intensity of carbon reduction policies, the lower the final level of carbon prices. Therefore, it is recommended to implement a time of use electricity pricing mechanism according to local conditions, guide electricity prices to tilt towards the cost of power generation, and moderately enhance the profitability of power enterprises. In addition, the intensity of implementing carbon emission control policies should match the development of the industry and should not be too aggressive.
Open Access: Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title: Proceedings of the 2024 10th International Conference on Advances in Energy Resources and Environment Engineering (ICAESEE 2024)
Series: Atlantis Highlights in Engineering
Publication Date: 9 May 2025
ISBN: 978-94-6463-708-3
ISSN: 2589-4943
DOI: 10.2991/978-94-6463-708-3_41 How to use a DOI?
Open Access: Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

ris enw bib

TY  - CONF
AU  - Luyao Wang
AU  - Zishuo Xu
AU  - Xiangtao Long
AU  - Ruoqi Zhang
AU  - Yuwei Cao
AU  - Qing Yang
AU  - Jianjun Xiao
AU  - Wenchuan Meng
AU  - Zaimin Yang
PY  - 2025
DA  - 2025/05/09
TI  - How Do China’s Electricity and Carbon Markets Interact?
BT  - Proceedings of the 2024 10th International Conference on Advances in Energy Resources and Environment Engineering (ICAESEE 2024)
PB  - Atlantis Press
SP  - 376
EP  - 384
SN  - 2589-4943
UR  - https://doi.org/10.2991/978-94-6463-708-3_41
DO  - 10.2991/978-94-6463-708-3_41
ID  - Wang2025
ER  -

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