Analysis of Issues and Countermeasures for the Synergistic Linkage Between Electricity and Carbon Markets

In the context of global warming, China has proposed the “dual carbon” (carbon peaking and carbon neutrality) targets, with the power industry playing a pivotal role as a major contributor to carbon emissions, and its decarbonization transformation being of utmost importance. This paper firstly elucidates the significance of the linkage between the electricity market and the carbon market, introduces the operational mechanism of the carbon market and the linkage mechanism between the electricity and carbon markets, and reviews the current status and development history of China's carbon market. Through an examination of data on carbon emission allowance trading in the national carbon market, this paper delves into the issues surrounding the coordinated linkage between the electricity and carbon markets, including imperfections in the price transmission mechanism and deficiencies in the mutual recognition system. To address these issues, the paper proposes countermeasures such as optimizing the carbon market pricing mechanism, improving coordination mechanisms, enhancing dynamic quota adjustments, providing policy support for renewable energy participation, establishing pilot projects for linkage, increasing the proportion of carbon market quota auctions, promoting policy coordination, refining the mutual recognition system, and establishing a bidirectional incentive mechanism. These measures aim to facilitate the coordinated development of the electricity and carbon markets and achieve the “dual carbon” targets.