Managing Coupled Electricity and Carbon Markets: A Multiagent Equilibrium Perspective

Clarifying the interaction between electricity and carbon markets is critical for coordinated market design and the low-carbon transition. However, most existing studies treat carbon prices as exogenous and overlook electricity consumers, thereby limiting explanatory power for real-world market dynamics. This study fills these gaps by developing a unified framework to examine the endogenous, bidirectional linkages between the two markets. Specifically, we construct a multi-agent decision-making model that incorporates the production, consumption, and abatement decisions of both producers and consumers. The results show that electricity and carbon prices have asymmetric effects on firm behavior, with carbon prices playing a central role in shaping abatement. Social welfare exhibits an inverted-U-shaped relationship with the allowance cap, suggesting the need for policymakers to calibrate cap levels within a welfare-enhancing range and to introduce stabilization mechanisms to prevent price collapses. Under a fixed cap, reallocating allowances between producers and consumers does not alter the carbon price, emissions, or welfare, with carbon costs passed through to electricity prices. Furthermore, benchmark allocation delivers stronger emission-reduction incentives than historical allocation and increases social welfare by up to 70%, underscoring its policy superiority. Methodological rigor is established through a suite of verification procedures, including 10000 Monte Carlo simulation runs calibrated with real market data, multi-parameter sensitivity and scenario analyses, and confidence interval evaluations, thereby demonstrating the statistical stability of equilibrium outcomes. Overall, this research offers theoretical and practical insights for improving the efficiency, stability, and decarbonization effectiveness of coupled electricity and carbon markets.