  Carbon emission right allowance is a double-edged sword, one edge is to
reduce emission as its original design intention, another edge has in practice
slain many less developed coal-consuming enterprises, especially for those in
thermal power industry. Partially governed on the hilt in hands of the
authority, body of this sword is the prices of carbon emission right. How
should the thermal power plants dance on the blade motivates this research.
Considering the impact of price fluctuations of carbon emission right
allowance, we investigate the operation of Chinese thermal power plant by
modeling the decision-making with optimal stopping problem, which is
established on the stochastic environment with carbon emission allowance price
process simulated by geometric Brownian motion. Under the overall goal of
maximizing the ultimate profitability, the optimal stopping indicates the
timing of suspend or halt of production, hence the optimal stopping boundary
curve implies the edge of life and death with regard to this enterprise.
Applying this methodology, real cases of failure and survival of several
Chinese representative thermal power plants were analyzed to explore the
industry ecotope, which leads to the findings that: 1) The survival environment
of existed thermal power plants becomes severer when facing more pressure from
the newborn carbon-finance market. 2) Boundaries of survival environment is
mainly drawn by the technical improvements for rising the utilization rate of
carbon emission. Based on the same optimal stopping model, outlook of this
industry is drawn with a demarcation surface defining the vivosphere of thermal
power plants with different levels of profitability. This finding provides
benchmarks for those enterprises struggling for survival and policy makers
scheming better supervision and necessary intervene.
