J Wang, Xinhua Zhang
This study identified the impact patterns of carbon price fluctuations and excess penalty mechanisms on power companies’ carbon emissions from the dual perspectives of market incentives and government intervention to address the issues of insufficient incentives for power companies to reduce emissions and environmental regulation mechanisms for emission reduction. Three main conclusions are revealed by the study: First, carbon emissions are significantly suppressed by the Environmental Protection Law of the People’s Republic of China (EPLPRC), with an inverse U-shaped link between carbon allowance pricing (CAP) and carbon emissions intensity (CEI). Moreover, the two exhibit synergistic effects. Second, two important transmission mechanisms are unit material cost (UMC) and green technological innovation (GHI). Third, there is significant variation in the results of emission reduction. While the inverted U-shaped effect of carbon allowance prices is most noticeable among medium-to-large non-state-owned businesses and in areas with rapid increase in thermal power capacity, EPLPRC works better for small non-state-owned businesses and large state-owned businesses. We also note that in areas where the expansion of thermal power generation is slower, dual environmental policies show significant synergistic impacts. These results offer direction for developing distinct carbon reduction strategies and promoting the power industry’s low-carbon transition.