Can China achieve carbon neutrality without power shortage? A substitutability perspective

The thermal power sector is responsible for more than 40% of China's carbon mitigation targets, making it critical in achieving carbon neutrality. However, the adoption of the "one-size-fits-all" discontinuation and "campaign-style" mitigation, driven by mandatory national regulatory constraints, has triggered pressing livelihoods and economic shocks such as electricity restrictions and shortages. To balance the carbon mitigation targets with electricity security in China, this study utilizes Morishima elasticity of substitution to identify heterogeneous production strategies for each plant under carbon neutrality. More specifically, how thermal power plants respond to carbon reduction targets. Results indicate that almost half of the thermal power plants could reconcile national targets with corporate profits, while the remaining plants could only meet national binding targets by reducing production. Additionally, about 20% of inefficient plants will opt to transfer emissions, such as increasing weakly regulated emissions, to secure revenue. The basic characteristics of thermal power plants under different production strategies are also analyzed. Finally, this study discusses how to develop electricity-carbon synergies and prevent productive speculation under the carbon neutrality transition from the perspectives of corporate production and tax deferment policy, and propose corresponding policy suggestions.