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Trade-off between policy effectiveness and social costs: What green power trading policy mix is most recommended?

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  • Xu, Jinhua
  • Wang, Xueying

Abstract

Green power trading plays a pivotal role in advancing renewable energy integration. However, research on its environmental and economic impacts under diverse policy contexts remains insufficient. Focusing on China's current green power trading mechanisms, represented by the tradable green certificate (TGC) market and green power (GP) market, this study adopts an agent-based model (ABM) to assess their effects on power generation, carbon emissions and economic outcomes under varying renewable portfolio standards (RPS) and carbon pricing intensities. By incorporating unit abatement social costs, it identifies market designs that balance effectiveness and economic feasibility. Results show that green power trading effectively boosts renewable energy generation and carbon abatement in the power sector. Compared with the single policy, multiple policy combinations can achieve deeper long-term carbon abatement or lower unit costs. The GP market achieves greater emission reductions than the TGC market at the cost of higher aggregate social costs; however, its unit abatement cost is projected to decrease over time and eventually fall below that of the TGC market. This study recommends a long-term transition to an independent national GP market, supported by a policy mix of stringent RPS (70 % solar and wind energy share by 2060) and moderate carbon pricing (50 yuan/t CO2). The mix is identified as the most recommended by balancing efficacy and economic viability.

Suggested Citation

  • Xu, Jinhua & Wang, Xueying, 2026. "Trade-off between policy effectiveness and social costs: What green power trading policy mix is most recommended?," Energy Policy, Elsevier, vol. 208(C).
    • Handle: RePEc:eee:enepol:v:208:y:2026:i:c:s0301421525004239
    DOI: 10.1016/j.enpol.2025.114916
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