Power Generation Mix Optimization under Auction Mechanism for Carbon Emission Rights

Erdong Zhao, Jianmin Chen, Junmei Lan and Liwei Liu ()
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Erdong Zhao: School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China
Jianmin Chen: School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China
Junmei Lan: International Business School, University of International Business and Economics, Beijing 100029, China
Liwei Liu: International Business School, University of International Business and Economics, Beijing 100029, China

Energies, 2024, vol. 17, issue 3, 1-24

Abstract: As the international community attaches importance to environmental and climate issues, carbon dioxide emissions in various countries have been subject to constraints and limits. The carbon trading market, as a market tool to reduce greenhouse gas emissions, has gone through a development process from a pilot carbon market to a national carbon market in China. At present, the industries included in the national carbon market are mainly the electric power industry, and the carbon emissions of the electric power industry account for about 40% of the national carbon emissions. According to the construction history of foreign carbon markets, China’s future carbon quota allocation will gradually transition from free allocation to auction allocation, and the auction mechanism will bring a heavy economic burden to the electric power industry, especially the thermal power generation industry. Therefore, this study takes Guangdong Province as an example to optimize the power generation mix with the objective of minimizing the total economic cost after the innovative introduction of the carbon quota auction mechanism, constructs an optimization model of the power generation mix based on the auction ratio by comprehensively applying the system dynamics model and the multi-objective linear programming model, systematically researches the power generation structure under different auction ratios with the time scale of months, and quantitatively evaluates the economic inputs needed to reduce the greenhouse gas emissions. The results of the study show that after comprehensively comparing the total economic cost, renewable energy development, and carbon emissions, it is the most scientific and reasonable to set the auction ratio of carbon allowances at 20%, which achieves the best level of economic and environmental benefits.

Keywords: carbon quota auction; power generation industry; renewable energy generation; total economic cost (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2024
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