Coupling Electricity Market with Emission Allowance Market: Problems and Solutions

This paper explores the frameworks for renewable electricity in China, focusing on market-based mechanisms that integrate renewable energy generation with the evolving electricity market and carbon trading systems. It examines Guaranteed Purchase (GP) obligations, participation in the regular electricity market, and the Renewable Electricity Market (REM), which reflect distinct methods for renewable power plants (RPPs) to engage in electricity sales and achieve economic gains. Additionally, the paper delves into the coupling of the electricity and emission allowance markets, identifying critical issues related to the use of green certificates (GECs), the risk of double counting emissions reductions, and the calculation of emission factors for embedded electricity. By proposing a dynamic method for calculating emission factors, the study offers a pathway for more precise carbon accounting, promoting environmental integrity in China's transition toward a low-carbon energy system. The paper concludes with policy recommendations to enhance GEC credibility, address double-counting risks, and align China's renewable energy systems with international best practices.