Exploring the synergistic effects of electricity‑carbon policies: A new perspective on power supply and demand based on game theory

Various countries worldwide have implemented policies designed either to directly curb greenhouse gas emissions from power plants, exemplified by Carbon Cap-and-Trade Scheme (CTS), or to encourage renewable energy growth, like Renewable Portfolio Standards (RPS). CTS and RPS share similar objectives due to the overlap of industry and sector. Nevertheless, it remains unclear whether their combined implementation can effectively foster renewable energy growth and reduce carbon emissions, given the complex interactions among electricity market participants. Our research develops a decision-making model for the electricity market that captures the strategic interaction between the supply side and demand side, as well as price competition between heterogeneous power generators. Four policy mechanism scenarios are constructed, and equilibrium outcomes are derived through backward induction. Building on the above model, we evaluate the synergistic effects of policy combinations, primarily the impact on electricity prices, renewable energy consumption, carbon emission reduction and social welfare. We further examine the effectiveness of RPS penalties and carbon trading regulations from the perspective of regulators. The findings suggest that the joint implementation of CTS and RPS fails to generate significant synergistic effects on carbon reduction or social welfare under current market conditions in China. When consumers' guilt coefficient for using coal-fired electricity and the carbon price are low, while the RPS target is high, the combination yields clear improvements in both outcomes. The impact of government supervision intensity on the efficiency of policy coordination provides policymakers with insights to better promote decarbonization and achieve sustainable development goals.