A study of carbon cost pass-through rate differences in the power generation industry

Abstract

In the context of the operation of China’s carbon emissions trading market, carbon cost pass-through will profoundly impact the country’s power generation industry. However, the core of studying carbon cost pass-through in the power generation industry is determining the carbon cost pass-through rate (CCPTR). Based on this, this paper first takes the Cournot model as the basic principle, which analyzes the impact of different power generation enterprises’ numbers and the characteristics of electricity market demand on the carbon pass-through results. Secondly, based on the Cournot model, this paper further CCPTR under marginal cost variability. The research results show that when the demand function is linear, the larger the CCPTR, the larger the proportion of carbon cost pass-through. When the demand function is isoelastic, the smaller the CCPTR, the smaller the proportion of carbon cost pass-through.