Carbon tax utility analysis based on multi-objective optimization and market equilibrium in power system

The current power system is grappling with substantial challenges in achieving lower carbon emissions. To tackle this issue, various policy instruments such as carbon taxes, Renewable Portfolio Standards, and carbon markets have been proposed. In this context, the primary aim of this paper is to assess the impact of carbon taxes on reducing carbon emissions and their influence on the overall efficiency of the power market. This study employs a bi-level model to derive the game equilibrium solution of the power market through fixed-point iteration. Furthermore, the normal boundary intersection method is employed to address the multi-objective optimization problem, which takes into account both generation costs and carbon emissions. This approach leads to the identification of the Pareto frontier and reveals the emission reduction potential of the power system. Through varying the magnitude of the carbon tax, sensitivity analysis is carried out, and simulations using the IEEE 30-node dataset demonstrate that carbon taxes can effectively curtail carbon emissions within the power generation system. However, it is worth noting that under certain conditions, a penalty-based carbon tax mechanism may encounter challenges in achieving the goal of carbon emission reduction.