Emission trading scheme reshapes the decarbonisation pathways of China’s power sector

The deep decarbonisation of China’s power sector is critical for meeting the country’s carbon-neutrality target and global Sustainable Development Goals. In this context, the emission trading scheme (ETS) is a pivotal policy tool. However, its mechanisms for advancing the power system’s clean energy transition and promoting the phaseout of thermal power plants remain unclear. We construct a comprehensive database of 4257 thermal power generation units operated by 2294 enterprises in China, which we curated and verified through multiple data sources. Integrating the SWITCH-China capacity expansion model with a carbon trading module, we evaluate the potential carbon profits and costs of currently operating ETS-regulated units and enterprises from 2025 to 2050, and their impact on the decarbonisation pathways of China’s power system. We find that China’s ETS exerts heterogeneous impacts across provinces: higher carbon prices are projected to slow the phaseout of large-capacity coal units and increase the capacity threshold for enterprises engaged in carbon trading. By 2050, due to unit phaseout and reduced operational dispatch, approximately 90.2% of the initially modeled ETS-regulated enterprises will neither generate carbon market revenues nor incur costs. These findings underscore the need for tailored policy interventions to maximise the ETS’s effectiveness across regions and enterprise types.