Two-leveled allocation mechanism based on regional comparison in China’s power sector

ABSTRACT

Carbon emission allocation is the core issue of “cap and trade” and is also critical to achieve carbon dioxide (CO₂) emissions reduction in the power sector. A two-leveled allocation mechanism based on regional comparison is proposed and the corresponding model is established. In the proposed mechanism, the first leveled allocation considers the unbalance of regional development and the maldistribution of generation resources in China; the second leveled allocation reaches the overall minimum cost in terms of efficiency and benefit. The simulation result shows that this allocation mechanism can properly allocate carbon emission permits and is helpful for reducing CO₂ emissions in the power sector in China.

KEYWORDS:

• Allocation mechanism
• carbon emission permit
• generation resource
• power sector
• regional comparison