## 2 Carbon Trading Mechanism
### Comparison of the Effects of Different Types of Carbon Trading Mechanisms  
Under the carbon trading mechanism, for such thermal power generators (denoted as GH type generators) whose carbon emission intensity is higher than the free carbon emission quota coefficient per unit of electricity allocation, the excess carbon emission cost must be paid. For such thermal power generators whose carbon emission intensity is lower than the free carbon emission quota coefficient per unit of electricity allocation (denoted as GL type generators), the carbon emission rights will be sold in carbon trading market for profit. The difference between UCT and LCT is mainly reflected in the control of the power output of GH type generators, and the difference between LCT and RPLCT is reflected in the incentive effect of the power output of GL type generators. Under the benchmark carbon price of 10 $/Ton, assuming that the carbon emission of a 100 MW GH type generator forms a ladder at 58 Ton (with a power output of 63 MW), the difference between UCT and LCT can be shown in Figure 1(a). Specifically, Figure 1(a) shows the relationship between the comprehensive unit variable output cost and output power of a GH type generator under UCT and LCT. The comprehensive unit variable output cost is the amount of change in the comprehensive cost required to change a unit of electricity per unit time. The comprehensive cost refers to the sum of carbon transaction costs and unit fuel costs. It can be seen from Figure 1(a) that, unlike UCT, LCT has a comprehensive unit variable output cost segmentation point when the output power is 63 MW. When the on-grid power tariff of the system is 41.2 $/MWh, as long as the output power of GH type generators under UCT is less than 80 MW, they will try to send them to 80 MW to obtain the maximum benefit. At this time, the system has no suppression capability for GH type generator with output power less than 80 MW. Under LCT, when the output power of the GH type generator is less than 63 MW, the system revenue is greater than the comprehensive unit variable output cost of the GH type generator. In order to optimize the system revenue, the system can limit the output of the GH type generator to 63 MW at this time. The emission of carbon dioxide is curbed. When the on-grid power tariff of the system is 42 $/MWh, under the condition of meeting the basic load constraint, as long as the output power of the GH type generator in UCT is greater than 20 MW, the system has no ability to suppress the output power of the GH type generator, which increases the carbon emissions. Under LCT, considering the overall revenue issue, the output power will be limited to 50 MW, and carbon emissions will be suppressed at this time. If the carbon price of UCT is simply increased, the ability to suppress carbon emissions will be improved, but the total cost of the system will rise sharply. Therefore, under certain economic conditions, LCT has a stronger ability to inhibit the carbon emissions of the system, which is conducive to the reduction of carbon emissions. Figure 1: Carbon price for UCT, LCT and RPLCT. Figure 2b shows the relationship between the comprehensive unit variable output cost and the output power of the GL type generator under LCT and RPLCT. Similarly, it can be analyzed that RPLCT has a stronger incentive effect on the power generation of GL type generator and indirectly promotes the reduction of system carbon emissions. When the generator output power increases and multiple carbon emission intervals are considered, Figure 2c shows the influence of three carbon trading mechanisms on the comprehensive unit variable output cost of coal-fired and GL type generators. The intersections A, B and C are the turning points when the economic benefits of GL type generators are better than that of GH type generators after considering UCT, LCT and RPLCT respectively.