Research on Key Issues and Coupling Mechanisms for the Coordination of China’s Electricity–Carbon Market

Under the policy to curb both total carbon emissions and emissions intensity, close and complex interconnections have developed between the electricity market and the carbon market. A clearer understanding of the relationship between the two markets can promote their coordinated development. This paper first reviews China’s policies for coordinated development of the electricity and the carbon markets, local practices and explorations, and the main challenges facing market coordination. It finds problems in the top-level management apparatus of the two markets and discordance between their institutional frameworks, which makes it difficult for the cost of carbon to be properly reflected in the price of electricity. Second, using system dynamics methodology, a coupled simulation model is constructed for the electricity and carbon markets. By identifying reinforcing loops (R) and balancing loops (B) within the system, we uncover the intrinsic dynamic mechanisms of market coordination. Third, we construct an electricity–carbon price coupling model based on the carbon cost pass-through rate. By quantifying how much of the carbon cost is passed on to end users, we design a differentiated cost pass-through mechanism. Finally, we offer research recommendations from the perspectives of data interoperability, coordinated assessment, differentiated pricing, and improving the spatiotemporal resolution of the carbon emission factor of electricity (hereinafter referred to as “electricity–carbon factor”).