System Dynamics Simulation of Policy Synergy Effects: How Tradable Green Certificates and Carbon Emission Trading Shape Electricity Market Sustainability

With the rapid growth of global energy demand, the fossil fuel-dominated electric power industry has led to serious environmental problems. Tradable green certificates (TGC) and carbon emission trading (CET) have become key mechanisms for promoting sustainable development of the electricity market by serving as market-oriented policy tools. To deeply analyze the impact of TGC and CET on the sustainable development of China’s electricity market and provide a scientific basis for policymakers. This study uses system dynamics (SD) methods to construct a policy synergy analysis framework for TGC and CET. It explores the impact mechanism of dual policy incentives on the sustainable development of the electricity market. Firstly, the current application status of TGC and CET in China was reviewed. Based on the literature analysis, identify key factors that affect the sustainable development of the electricity market. Then, by deconstructing the interaction between TGC policy and CET policy, an SD model was established that includes multidimensional feedback such as policy, technology, funding, and market, and the dynamic functional relationships in the SD model were quantified. Finally, Vensim PLE software 7.3.2 was used to simulate the evolution of sustainable development in the electricity market under different policy scenarios. The research results indicate that (1) the adjustment of the TGC quota ratio can change the supply and demand mechanism to form a price leverage effect, effectively stimulate the growth of renewable energy generation capacity, and accelerate the low-carbon transformation of power enterprises; and (2) the CET market changes the cost structure of power generation through carbon price signals. When the carbon emission cap target tightens, CET prices quickly rise, leading to a significant trend of carbon reduction in the electricity market; (3) the application of policy combinations can significantly promote the sustainable development of the electricity market, but the unreasonable setting of policy parameters can trigger market risks. Therefore, policy design should focus on flexibility and implement appropriate policy combinations at different stages of electricity market development to promote green transformation while ensuring smooth market operation. This study innovatively reveals the synergistic effect of TGC and CET in the sustainable development of the electricity market from a systems theory perspective. The research results provide a scientific basis for decision-makers to formulate policy adjustment plans and have essential reference value for achieving the dual goals of energy structure transformation and electricity market stability.