Dynamic optimisation of carbon allowance considering inter-provincial energy resources trade for emissions reduction: Case of China southern power grid

Abstract

As the main carrier of natural resources into energy, the power industry is the world's largest carbon emitter, and its sustainable development will have far-reaching impacts on the utilization of natural resources and economic growth. Carbon trading market is a widely used tool to promote proactive emissions reductions in the electricity industry in different regions. On this basis, inter-provincial trading in the power industry creates a hidden carbon transfer between producers and consumers of energy resources. Therefore, it is necessary to construct systematic multi-period emission reduction measures to deal with the conflict and coordination of the operation of the two systems. In this study, to promote orderly emission reductions in the power industry in areas with different natural resource endowments, a two-tier decision-making model for carbon allowances allocation based on interactive model predictive control technique is constructed. The model readjustss the overall allowances by tracking the implied carbon transfer flows between regions and implementing a production-oriented allowance compensation mechanism, forming an optimisation strategy for carbon compliance cost and emission intensity in the power sector. The experimental results show that adjusting the regional allowance distribution in inter-provincial transmission can alleviate the impact of high emission reduction pressure on the overall carbon compliance cost, while the rolling horizon optimisation of the carbon baseline value can approach the expected emission reduction target in stages. Taking the Southern Power Grid as an example, this study ultimately provides policy recommendations for sustainable emission reductions under multi-period inter-provincial trade in energy resources.