Coordinating carbon, electricity, and CCER markets for cost-effective decarbonization of China's power sector

The electricity sector faces multiple challenges during its transition, including pressure to reduce emissions, cost constraints, and uncertainty in the design of low-carbon policies. Consequently, effective coordination between policy instruments in the electricity and carbon markets has become essential for achieving a cost-effective sectoral transition. Using an SD-Un-Super-SBM framework, this study develops an integrated analytical model that links the electricity market, carbon allowances (CA), and Chinese Certified Emission Reductions (CCER) and systematically evaluates how different policy instruments and their settings affect sectoral development and structural adjustment. Fifteen scenarios are designed to examine the effects of the carbon emission factor, the EU marginal abatement cost benchmark, the CCER offset ratio (COR), and the government approval ratio (GAR). The results show that setting the carbon emission factor at 0.74 kgCO₂/kWh is crucial for constraining thermal power expansion and increasing the share of renewable energy to 77.3%. The coordinated implementation of CA and CCER reduces the overall compliance burden by approximately 35% through a combined effect. National- and provincial-level analyses further indicate that the optimal national COR and GAR are 6% and 10%, respectively, although substantial regional heterogeneity calls for differentiated policy design. These findings provide a useful basis for reducing transition costs, improving resource allocation, and enhancing policy coordination in China's power sector.