Regional coordination for emission reduction and energy supply in transition: A spatiotemporally adaptive policy framework based on markets dynamic reconstruction

Baojun Tang, Huchen Feng and Ru Li

Energy Policy, 2025, vol. 206, issue C

Abstract: As a core area of the global carbon neutrality process, the orderly transition of the power system faces the challenge of reconciling energy and environmental aspects. However, the coordination paths of parallel mechanisms for multi-regional power producers have not yet been systematically adjusted based on market states. Taking China's power sector as an example, this study constructs a framework for the coupled operation of the carbon market and the power market considering regional heterogeneity and proposes the Response-Trend-Accumulation-Shap mechanism to reconstruct and transform the market coupling trend to coordinate the operation of the carbon quota and capacity compensation mechanisms. The study shows that the coordination mechanism can compress the carbon emission space by 1.5 billion tons from 2021 to 2060 based on achieving the integrated target, and can regulate the implementation strength of different mechanisms in phases according to regional transformation characteristics. Finally, policy proposals are made to flexibly adjust the benchmark value of carbon quotas and differentiate capacity compensation policies, to achieve a balance between carbon emission reduction and energy supply under heterogeneous regional conditions.

Keywords: Carbon trading market; Capacity compensation mechanism; System dynamics; Cooperative game; Mechanism coupling (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:206:y:2025:i:c:s0301421525003106

DOI: 10.1016/j.enpol.2025.114803

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