Impact of carbon allowance allocation mechanism and power dispatch on renewable energy investment

Promoting renewable energy investment and optimizing power scheduling are key measures for carbon emission reduction in the power system. The carbon market, as an important tool for emission reduction, will bring about great impacts on them. Comparative analysis of the impacts of different carbon market mechanisms on renewable energy investment and power scheduling will shed light on the development of the world's carbon markets, especially in regions where carbon markets are being constructed. By constructing a mathematical model, we explored the impacts of different carbon quota allocation mechanisms on renewable energy investment and power dispatch. In addition, carbon credit as a complementary mechanism to the carbon market, its price and offset ratio will affect the renewable energy investment. The results of the study show that: first, firms invest more in renewable energy and produce lower carbon emissions under grandfathering than under benchmarking. Second, a higher carbon credit price and lower carbon credit-emission offset rate ceiling can promote renewable energy investment, while the impact of the carbon price on renewable energy investment is heterogeneous, with a higher carbon price under benchmarking triggering lower investment in renewable energy of low-emission generators. We further found that adopting the benchmarking mechanism will raise the risks of incentive distortion and rent-seeking by firms under market-barriers to power dispatch, and firms may strive to obtain higher utilization rates rather than higher generation efficiency.