  Facing the dilemma of growing energy demand and mitigating carbon emissions,
this paper proposes an energy sharing mechanism based on virtual federated
prosumers (VFPs) with budget allocation for joint electricity and carbon market
to incentivize distributed energy resources to participate in the hierarchical
market and reduce carbon emissions. At the transmission level, the regional
transmission operator coordinates transactions between two markets, the
inter-VFP energy sharing market and the wholesale market, intending to minimize
the overall cost of VFPs. The energy sharing market clearing problem is
formulated as a generalized Nash game, for which we develop a first-order
response algorithm to obtain the equilibrium. At the distribution level, the
VFPs play the role of selfless auctioneer that leverage discriminatory weights
and benchmark prices to allocate the electricity-carbon budget among entities
in the VFP to maximize social welfare. The Nash game is exploited to
characterize the budget allocation problem, for which a distributed feedback
allocation algorithm is proposed. The entire hierarchical electricity and
carbon trading is modeled as an equilibrium problem and is solved iteratively.
Case studies based on a practical regional grid verify the effectiveness of the
proposed algorithm and show that the mechanism is effective in improving energy
efficiency and reducing carbon emissions.
