  The decarbonization of the power sector plays a pivotal role in economy-wide
decarbonization to set the world on track to limit warming to 1.5{\deg}C by
2050. Carbon emission markets can play a significant role in this transition by
putting a price on carbon and giving electricity producers an incentive to
reduce their emissions. In this paper, we study the operational equilibrium of
an integrated regional/jurisdictional energy system that comprises an
electricity market, a natural gas market, and a carbon emission market. We
first propose the novel role of a regional carbon market operator (CMO).
Different than the conventional cap-and-trade carbon trading mechanism, the
proposed CMO manages carbon allowance trading in a centralized jurisdictional
carbon emission market. We then develop the formulation to identify the
operational equilibrium of the electricity, natural gas, and carbon emission
markets based on their interactions. The proposed equilibrium can be obtained
by solving the Karush-Kuhn-Tucker (KKT) conditions of all three operational
models simultaneously. Simulation results demonstrate that the proposed
approach is more flexible, consistent, and effective in mitigating carbon
emissions compared with the cap-and-trade mechanism.
