Interplay of carbon pricing and emission policies: A game-theoretic study of China's electricity market

The low-carbon transition of China's power sector is critical for meeting national and global carbon neutrality targets, and requires effective coordination between carbon pricing instruments and emission reduction policies. However, most existing studies examine these policies in isolation and overlook the complex strategic interactions among multiple stakeholders in China's electricity market. This gap limits understanding of how different policy combinations jointly affect emission outcomes, market stability, and corporate profitability. This study systematically examines the synergistic and conflicting effects of carbon pricing instruments and emission reduction measures within China's electricity market, providing quantitative evidence for formulating coordinated low-carbon policies. A multi-agent Stackelberg game model is developed to capture the strategic interactions among the central government, provincial authorities, power enterprises, and consumers. Equilibrium analysis and impact assessment are conducted across seven policy scenarios involving minimum emission reduction revenues, carbon trading prices, and electricity cost ratios. The study finds: (1) Coupling minimum emission reduction revenue with minimum carbon trading price policies undermines corporate profit stability and exacerbates carbon price volatility risks; (2) Significant disparities in provincial carbon reduction performance call for region-specific low-carbon strategies; and (3) interactions among policy interactions may reduce overall system efficiency, highlighting the importance of unified carbon market regulation. Overall, this study provides decision support and practical guidance for policymakers, regulators, and energy enterprises to optimize carbon pricing mechanisms, promote regional equity, and facilitate a balanced and orderly energy transition within the power sector.