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Carbon emission trading mechanism is an important market-based instrument to address global climate change. The auction ratio and price of carbon emission allowances (CEA) are cores of the carbon emission trading mechanism. What combination of CEA auction ratio and auction price is most conducive to carbon emission reduction for emission control enterprises? There are still relatively few studies conducted on this issue, and there is no clear answer from the views of theory and practice. In this paper, the AIM/Enduse model was used to analyze the changes and differences of installed power capacity, power supply, energy consumption and carbon emissions in the Guangdong-Hong Kong-Macao Great Bay Area (GBA) with different combinations of CEA auction ratios and prices. Moreover, the best pathway of energy transition was explored in the power industry of the GBA, and the best combination of CEA auction ratios and prices was identified in the GBA. The results show that: (1)The carbon emission constraint starts to work only when the auction ratio of CEA is increased to 50% and the auction price is increased to 60 CNY/ton (Scenario p 3). When the auction ratio of CEA is 100% and the auction price reaches 120 CNY/ton (Scenario p 5), a low-carbon transition of the power sector in the GBA can be achieved. (2) Under scenario p 5 , the total cost of power transition rises and then falls. And the cost of carbon in the power sector increases exponentially as the auction ratio of CEA and the auction price rise. However, the growth in the cost of power supply is relatively flat, which shows that appropriate carbon trading mechanism can improve the economic benefits of power sectors. With the increase of installed capacity of clean low-carbon energy generation and power supply, as well as the decrease of local power cost in the GBA, the proportion of outsourcing power can be appropriately reduced in the future, with an aim to reduce the external dependence of electricity to ensure the security of energy supply. In the end, it suggests that cities in the GBA should give full play to their regional advantages and establish a unified carbon emission trading market in the GBA as soon as possible. This study provides a theoretical basis for the supplementation and improvement of China's carbon emission trading mechanism. • What is the best combinations of CEA auction ratios and auction prices in the GBA? This paper gives a clear answer. • The best transition pathway of the power industry under technological progress and carbon trading policy was suggested. • With the decrease of local power cost, the proportion of outsourcing power can be appropriately reduced in the future. • Provides a theoretical basis for the supplementation and improvement of China's carbon emission trading mechanism. [ABSTRACT FROM AUTHOR]

Under the Kyoto Protocol's Clean Development Mechanism (CDM), countries worldwide co-operate on encountering climate change by emissions trading, which enables a win–win situation by effectively “regenerating” a cleaner environment in developing countries, whilst efforts in developed countries may still not meet their committed targets of carbon reduction. According to the CDM rules, energy efficiency improvement projects in the building sector are valid for emissions trading. Although the potential saving of energy is significant, there is only a limited number of building projects being registered as CDM projects. This paper explores the applicability of CDM in the building sector by reviewing the implementation of CDM and its advantages and disadvantages. Hong Kong was selected for an in-depth study due to its eligibility for CDM and yet non-starter status. According to a questionnaire survey supplemented by interviews with the stakeholders in this study, major hindrances such as the lack of financial incentive, inadequate knowledge about emissions trading and insufficient governmental support were found in potential CDM projects in the building sector. It is recommended that an inter-city emissions trading market covering mainland China and Hong Kong, and suitable emission reduction targets should be established and led by the government at the initial stage. By setting up an emission exchange centre, local emissions trading activities could be facilitated and job opportunities could be created. In addition to conducting emissions trading, Hong Kong may also contribute to emissions trading in the region by making use of its highly skilled professional services and efficient business environment. This study paves the way for a densely built city such as Hong Kong to benefit environmentally and economically from a cleaner region in its vicinity. [ABSTRACT FROM AUTHOR]