to build a unified national electricity market system in line with international carbon emission rules

Xia Qing, Guo Hongye, Department of Electrical Engineering, Tsinghua University, Kui Gongyu, Chen Huguo, Beijing Qingneng Internet Technology Co., Ltd.

Under the global carbon neutral wave, carbon emission rules have become the core of reshaping the international trade pattern and the logic of industrial competition. The full landing of the EU Carbon Border Adjustment Mechanism (CBAM) and the accelerated promotion of international green supply chain standards such as RE100 have not only reconstructed the global industrial competition order, but also posed a rigid challenge to the transformation of China's electricity market.

For a long time, my country has always regarded maintaining a stable electricity price and enhancing the international competitiveness of the manufacturing industry as an important goal. However, if the EU carbon tariff is not handled properly, it is very easy to cause the manufacturing industry to erode the profit space of enterprises due to the additional carbon cost and lose the international competitive advantage. Therefore, the core of building a unified national electricity market system in line with international carbon emission rules is to reconstruct the green power market trading system-to achieve green development and international competitiveness on the basis of ensuring reasonable and stable electricity prices and maintaining the cost advantage of manufacturing electricity. The establishment of this system is not only a realistic need to deal with international carbon trade barriers and strengthen the international competitiveness of manufacturing industry, but also a core path to promote the transformation of energy structure and realize the strategic goal of "double carbon.

At present, China's power market green trading is still facing the market mechanism is not perfect, cross-provincial allocation is not sufficient, green power environmental value is not prominent, green power traceability is not accurate and other issues, it is difficult to adapt to the international carbon emission rules under the green power value accounting needs. This requires green power PPA (renewable energy purchase agreement) as the core grasp, through the system coordination, traceability upgrade, resource optimization, international docking four-dimensional force, to create "rules compatible, clear value, smooth flow, effective supervision" integrated system.

the impact of international carbon control measures and its

core requirements for the electricity market

The core logic of the international carbon emission system is "internalization of carbon cost, quantifiable environmental value and traceability of the whole process, clear requirements for the green transformation of the electricity market. Among them, the EU carbon border adjustment mechanism (CBAM) has the most far-reaching influence, and its rule framework is also the most representative.

CBAM has entered the formal operation stage since January 1, 2026, initially covering simple products such as steel, aluminum, cement, fertilizer, hydrogen, and electricity. Starting from 2028, CBAM coverage will gradually expand to downstream complex products such as machinery and home appliances. According to statistics from the General Administration of Customs, my country's exports of EU goods in the first three quarters of 2025 amounted to 2992.07 billion yuan, an increase of about 9.4 percent over the same period in 2024. In recent years, the proportion of high-end industrial products such as automobiles and electromechanical products in China's exports to the EU has gradually increased. In the first three quarters of 2025, the export value of mechanical and electrical equipment and its parts and accessories, vehicles and their parts and accessories were 1314.54 billion and 200.89 billion yuan respectively, up 8.0 percent and 14.6 percent year-on-year, accounting for about 53 percent of China's total exports to the EU. When CBAM is expanded to steel and aluminum downstream industrial products, it may affect the international competitiveness of China's high-end manufacturing industry.

CBAM is extremely demanding in terms of indirect carbon emissions accounting for electricity consumption. Although the EU will only examine the carbon emissions of cement and fertilizer products in the initial stage of 2026, China's high-end industrial products such as mechanical and electrical products and automobiles will also face constraints after the subsequent product expansion. Exporters need to meet the core requirements of the following three dimensions if they want to declare the use of low-carbon electricity to reduce the carbon tax on their products.

One is form matching. The two forms of accounting for electricity carbon emissions using actual carbon emission factors recognized by CBAM are "physical direct connection" or "renewable energy purchase agreement (PPA)". For physical direct connection, a direct, point-to-point physical connection between the power generation facility and the commodity production facility that does not go through the public grid is required in the form of technical documentation; for PPA, a physical delivery rather than a financial contract is required, and a substantial grid connection between the power plant and the plant is also required.

The second is space-time correlation. CBAM clearly stipulates that whether physical direct connection or PPA is adopted, it is necessary to provide hourly-level electricity meter data on both sides of the power generation and electricity consumption, and to prove that power generation and electricity consumption are completely corresponding in time. The core is to ensure that the declared low-carbon electricity is used to produce the declared CBAM commodities. Although the form of PPA is more flexible, it needs to provide additional proof of "non-blocking" of the grid between the two sides of the application at each moment, which is more complex and regulatory.

The third is traceability compliance. Electricity companies need to clearly distinguish all sources of electricity, including physical direct connection, PPA and other network power. In particular, under the PPA model, if renewable energy power is purchased through an intermediary party, it must be proved that it is the only contract signed by the generator, the user and the intermediary party to ensure the clarity of liability and the traceability of renewable energy power. For environmental rights and interests such as green certificates, it is necessary to realize the closed loop of the whole process of "power generation-trading-write-off" to eliminate the double calculation of environmental benefits.

China's electricity market has made phased progress in the green transformation of China's electricity market and international

since 2021, the scale of green electricity trading has expanded year by year and the green certificate system has been continuously improved, however, in the process of integrating with international carbon emission rules, there are still five problems. The core contradictions are "imperfect market mechanism, imperfect value system and unclear international mutual recognition".

The imperfection of the trading mechanism of the green power market is the most prominent problem. Putting aside the differences at the project financing level, China's green power transactions still have a lot of room for optimization compared to the PPA model approved by CBAM. CBAM requires a tripartite contract between the power generation side, the power sales company and the retail users. The latest version of the green power rules in the State Grid operation area has required the green power contract to be implemented to specific users, but the connection with the retail market still needs to be strengthened. Jiangxi has piloted hourly green electricity transactions, but overall, the hourly measurement, settlement and traceability of green electricity have not yet been fully rolled out, and the connection with other markets needs to be further improved. On the other hand, there are still some differences in the implementation level of green power transactions in the provinces under the three major power grid areas, which is difficult to adapt to CBAM requirements.

There are barriers to cross-provincial and cross-regional transactions and resource allocation. China's green power resources are concentrated in the northwest and north China, but the load center is in the southeast coast, forming a "reverse distribution" pattern. Under the assessment of the dual control of carbon emissions and the responsibility weight of renewable energy power consumption, some new energy surplus provinces are reluctant to sell. In addition, although China has promoted the construction of green power direct connection in an orderly manner, it is difficult to match the green power consumption demand of export enterprises due to the limited resource endowment and land resources in the load gathering area.

There is a gap between the traceability compliance system and international standards. In addition to the lack of hour-level traceability mechanism, China has not yet established a national unified electronic traceability platform covering direct connection for self-use, provincial green electricity transactions and inter-provincial green electricity transactions. The data are scattered in many departments, resulting in difficulty in supervision and verification, difficulty in obtaining accurate and credible panoramic green electricity consumption certification for power users, difficulty in supporting them to cope with international green trade barriers, and pushing up the export compliance cost of enterprises.

The interface mechanism with the spot market and the risk hedging system need to be further improved. China's green power trading and electricity-carbon accounting system has not yet fully established linkage with the spot market. The risk of green power fluctuations between the two parties to the PPA transaction should be undertaken by the spot market, and the corresponding balance cost should be calculated based on the volatility of green power, the spot market price, and the deviation of electricity carbon emissions should be calculated based on the average carbon emission factor. This mechanism will effectively incentivize both parties to achieve self-balancing between supply and demand through the source-load interaction model, such as supporting the construction of energy storage facilities, the implementation of demand-side response strategies, etc., and avoid distortion in carbon emissions accounting. In addition, green power transactions are mostly short-term contracts, multi-year contracts accounted for a low proportion, the lack of price insurance, asset securitization and other risk hedging tools, it is difficult to match the long-term financing needs of green power projects, but also can not effectively hedge the risk of price and output fluctuations.

Policy synergy and international docking mechanisms need to be accelerated. China's electricity market reform involves energy, ecological environment, commerce and other departments, the current policy fragmentation problem, the national-provincial-municipal levels of green electricity consumption incentives, energy consumption double control and carbon double control convergence rules are not unified, enterprise procurement lack of clear guidance. At the international docking level, the rules dialogue and mutual recognition channel between China and the European Union and other major carbon emission systems has not yet been fully landed, green power project certification standards, emission factor accounting methods and international incompatibility, resulting in enterprises in CBAM declaration accounting difficult, high compliance costs.

the core path of building a national power market system that is in line with international standards

The core goal of building a power market system that is in line with international carbon emission rules is to "meet CBAM compliance requirements, activate green power market vitality, and ensure the international competitiveness of the industry, the core path is to establish a PPA-led development model for green power trading, promote PPA's full integration into the national unified power market system, form an integrated system of" physical direct supply + hourly traceability + certification closed loop + mutual recognition of rules ", and fully release PPA's personalized trading advantages and green power's core value to users.

With the reconstruction of the green power market trading system as the core, PPA matching the relationship between the two sides of the issue is established as the main mode of green power trading, so as to realize the triple guarantee of electricity price stability, user value enhancement and international competitiveness enhancement. Through the formulation of national unified PPA rules, we can further standardize the market order and promote the standardization process of national unified power market rules. The key to reconstructing the trading system of the green power market is to make PPA the core link between the power generation side and the user side, and to straighten out the logic of green power value transmission-to tap the environmental value of green power through the market-oriented attributes of PPA and help users hedge the cost of carbon tariffs. First, the green power PPA matching the distribution relationship will be fully incorporated into the national unified power market framework, accelerate the formulation and implementation of the national unified green power PPA trading rules, covering the core terms of the contract, trading process, access and exit standards and other key contents, standardize the convergence mechanism of price difference settlement and deviation handling, and take the unification of PPA rules as the starting point to drive the standardization of the whole chain rules of power market trading, measurement and settlement. We will further promote multi-year contracts (10-20 years) based on bilateral transactions and give market entities full autonomy in personalized transactions. Users can independently select counterparties, contract terms and pricing methods according to their own export scale, carbon tariff pressure, peak and valley characteristics of electricity consumption load and compliance requirements, so as to realize the accurate matching of "one household, one policy. In the annual, monthly and other short cycles; carry out green power centralized trading varieties based on price matching, through the centralized bidding market, the formation of a number of PPA, reduce transaction costs, improve transaction efficiency. The key to the core advantage of the PPA model is to allow green electricity to form a price system independent of fossil energy, to internalize the environmental value of green electricity precisely in the "environmental premium" part of the PPA contract, to avoid price erosion caused by the transmission of green value to fossil energy electricity prices, to fundamentally ensure the stable operation of fossil energy electricity prices, and to achieve a stable two-way balance between green electricity development and fossil energy electricity prices. In addition, the green power trading led by PPA can build a linkage mechanism of "electric energy market-green power PPA market-carbon market", ensure the isolation of green value and fossil energy electricity price, and realize the coordinated promotion of green development and cost control. The second is to establish a fully market-oriented pricing mechanism adapted to the PPA-led model, and implement the three-stage pricing of "power volume price + environmental premium + adjustment cost. The price of electricity energy is formed through market clearing, which accurately reflects the real supply and demand cost; The environmental premium anchors the domestic carbon market price, so that the emission reduction value of green electricity can be reasonably realized, which not only ensures the income on the power generation side, but also allows users to clearly perceive the compliance value and environmental value of green electricity. The adjustment cost is the price paid by the spot market for the deviation service provided by PPA, let PPA independently choose whether to balance through the spot market or self-balance (with energy storage, demand-side response), and ultimately achieve a balance between reasonable and stable electricity prices and the value of green power users. The third is to build a unified national PPA rule, standardize the market-oriented classified management of stock/incremental green electricity projects, unify the access standards, measurement and settlement rules and green certificate circulation requirements for inter-provincial PPA transactions, completely break down inter-provincial barriers, promote the coordination and unification of national electricity market rules with the unification of PPA rules, reduce the compliance cost and transaction cost for users to participate in PPA transactions, consolidate the electricity price advantage of manufacturing industry, and stimulate the enthusiasm for green electricity consumption.

Upgrade the traceability and certification system to meet international compliance requirements. The first is to transform the existing green certificate system, build a national unified "green electricity + green certificate" integrated traceability platform, implement "project-unit-hour level" fine measurement, and realize the electronic process of green certificate issuance, transaction and cancellation.A mandatory mechanism of "one electricity, one certificate, one cancellation" will be established. After the transaction is completed, the green certificate will be canceled synchronously, and a "compliance package" containing electricity generation and consumption data, transaction vouchers and certification reports will be generated to adapt to international traceability standards such as EU CBAM and I-TRACK. The second is to strengthen data exchange and supervision, integrate power grid dispatching, trading and metering data, access the carbon accounting system of the ecological environment department, open the interface to the CBAM reporting system, provide enterprises with the required power grid information for reporting, and support real-time verification and cross-validation. Establish a cross-sectoral joint supervision mechanism, unify data caliber and verification standards, and eliminate double-counting of environmental benefits. The third is to optimize the certification standards, benchmark the EU, North America and other international green trade requirements, improve the certification methods of green power projects, actively promote the mutual recognition of domestic certification agencies and international authorities, and enhance the international recognition of certificates.

Cross-provincial and cross-regional resource optimization to break the bottleneck of reverse distribution. First, we will continue to improve cross-provincial trading rules, continue to expand the supply of green power, and promote the implementation of the inter-provincial new energy priority power generation plan by means of green power trading. Priority support the Yangtze River Delta, Pearl River Delta and other export-oriented parks and northwest/north China green power base signed a multi-year green power PPA, to ensure physical delivery and traceability clear, so that users can obtain sufficient green power, give full play to the personalized matching advantages of PPA. The second is to strengthen the support and guarantee of the power grid, speed up the construction of trans-provincial and trans-regional transmission channels and improve the transmission capacity of green power, guided by the requirements of the national unified PPA rules for power transmission. Optimize the power grid dispatching mechanism, study the physical transmission certification method of green power PPA, ensure the PPA contract performance rate, enhance the confidence of users in participating in PPA transactions, and promote the standardization of green power dispatching rules in the national power grid.

The adjustment ability and risk hedging are strengthened to ensure the stable operation of PPA-led green power transactions and enhance the user's green power consumption experience. First, to stimulate the development of flexible resources, thermal power flexibility transformation, energy storage, pumping and other regulatory resources into the auxiliary service market, expand the coverage of peak, frequency modulation and other trading varieties, improve the return on investment of flexible resources. Establish a scientific adjustment cost-sharing mechanism, incorporate the adjustment cost brought about by the fluctuation of green power into the price of green power in proportion, and bear it reasonably by the consumer, balance the interests of the power generation side and the user side, and ensure the stable supply of green power under the PPA agreement. The second is to improve PPA supporting risk hedging tools and introduce green power PPA price insurance, carbon price linkage clauses and other products to help users hedge the risks of electricity price fluctuation, carbon price fluctuation and green power output fluctuation. Encourage green power PPA asset securitization, reduce project financing costs, attract social capital to participate in green power project construction, expand PPA market supply, and provide users with more personalized trading options.

International docking and enterprise services are improved to enhance the international recognition of PPA-led green power transactions and maximize the value of green power to export users. The first is to promote dialogue and mutual recognition of rules, strengthen China-EU negotiations during the period of CBAM rule improvement, focus on striving for the green electricity traceability standards and certification rules under China's PPA model to be recognized by the European Union, and incorporate domestic green certificates into the certification system recognized by the European Union. Establish a pilot program for mutual recognition of China-EU green power certification standards, explore the "one-time certification, mutual recognition" mechanism, reduce the cost of repeated accounting after users consume green power through PPA, so that the compliance value of PPA can be fully reflected in the international market. The second is to build a supporting basic support system for PPA, establish a unified national power grid emission factor, unit carbon footprint dynamic database, regularly updated and publicized to the international, for the PPA model of green power actual emission factor accounting to provide an authoritative basis. Build a CBAM compliance declaration service platform to provide one-stop services such as PPA contract templates, data docking, voucher generation, declaration counseling, etc., to improve the compliance efficiency of users after consuming green electricity through PPA. The third is to strengthen the pilot demonstration lead, in the Yangtze River Delta, Pearl River Delta and other export-oriented industrial agglomeration areas, to carry out green power direct PPA international certification demonstration project, summarize the replicable personalized trading model and rules experience, and gradually promote to the whole country, so that more users perceive the value of PPA-led green power trading. Fourth, actively participate in the formulation of the international green trade standard system, and promote the formation of international carbon trade rules that are more fair, inclusive and reflect the reality of energy transformation in developing countries by taking the lead in the establishment of green international organizations, international industry alliances, participation in international green power trading, and the formulation of carbon trading standards, from a "passive recipient" of the rules to an "active leader". Fundamentally protect the long-term competitiveness of China's industry.

implementation path and safeguard measures

the construction of a power market system in line with international carbon emissions needs to be carried out step by step and steadily in three stages: short-term (by mid -2026) completion of hourly transformation of traceability system, release of CBAM adaptive green power PPA standard contract template, and achievement of core compliance elements; in the medium term (before the end of 2026), we will complete the merger of market rules, carry out international mutual recognition pilot, and promote large-scale transactions of green power PPA. In the long term (from 2027 onwards), the adjustment cost will be fully included in pricing, green power PPA will become the mainstream trading variety, and international mutual recognition will be normalized, forming a market-driven green power consumption pattern.

in order to ensure the landing of the target, three major safeguard measures need to be strengthened: first, regulatory coordination, establishment of cross-departmental joint working mechanisms such as energy, ecological environment, commerce and customs, unification of policy formulation, data supervision and law enforcement standards, and avoidance of regulatory fragmentation; The second is financial support, providing low-interest loans and financing guarantees for CBAM-adapted green power PPA projects, encourage financial institutions to develop green power PPA asset securitization, green certificate pledge financing and other products to reduce project financing costs; third, capacity-building, strengthen special training for market players, popularize international carbon emission rules and green power PPA trading knowledge, and enhance corporate compliance operations and risk response capabilities.

conclusion

the essence of green power PPA is to open up the whole chain of "green power production-consumption-compliance" through market-oriented contracts, and promote the deep transformation of green value from "policy subsidy-driven" to "market transaction-driven. Its core value is to free new energy from the price constraints of the fossil energy power generation market, and to build an independent pricing model of "environmental premium adjustment cost of electric energy quantity and price. This model not only enables green power users to maintain the advantages of manufacturing electricity prices and ensure the stability of fossil energy electricity prices, but also helps China's commodities to stabilize the global market advantages by hedging the carbon tariff costs of export enterprises and enhancing the competitiveness of green supply chains. It can fully release the scale and technological dividends of China's new energy and new energy storage industries and become the core market-oriented carrier linking energy transformation and international carbon rules.

As my country's energy regulation during the "Tenth Five-Year Plan" period shifts from "energy consumption dual control" to "carbon dual control", carbon market prices will continue to rise. The core value of the green power PPA model is to build a dynamic and balanced bridge between the power market, the carbon market and the new energy market for users-users can choose their own new energy allocation scheme according to their own carbon intensity targets, emission reduction needs and cost expectations, realize the accurate adaptation of carbon cost hedging and green transformation, and make market-oriented selection an active strategy for enterprises to deal with carbon constraints.