The coupling effect of carbon emission trading and tradable green certificates under electricity marketization in China

Abstract

To accelerate the low-carbon transition in the energy sector, China is gradually promoting the construction of the national electricity market and carbon market . Carbon emission trading (CET) and tradable green certificates (TGCs) are advocated as promising tools to control carbon emissions. However, the efficacy of these concurrent low carbon regulations remains an open question, especially considering that their implementation schemes are quite different. Therefore, herein, the coupling effect of carbon emission trading and tradable green certificates is examined under electricity marketization in China. An interactive system dynamics (SD) model is established to capture the internal linkages among CET, TGCs and electricity market. Different markets are connected through the investment behaviour of market participants and the price formation mechanism, and the dynamic equilibrium process of multiple markets is analysed based on the current electricity marketization in China. The simulation results based on real-world data in China show that the coordination of TGCs and CET alleviates the pressure of the fiscal deficit of renewable energy and promotes the low-carbon transition in the energy sector, and relevant policy recommendations are put forward. Hopefully, our work can provide a useful reference and insight for low-carbon policy design and energy market construction.