Combined with the energy-saving and emission-reducing policy practiced in China， the mechanism and prerequisite of generation right exchange is given. A number of aspects are analyzed including the market efficiency， market risk， market fairness， market game behavior， the fairness of settlement price and the efficiency of resource allocation. The application of generation right exchange theory on nine aspects is given. The intra-province， inter-province and inter-area generation right exchanges are compared. From the angle of improving overall utilization efficiency of energy， the boundary conditions are given for inter-province and inter-area generation right exchange. The potential or effects of energy-saving and emission-reducing for the generation right exchange or the energy-saving generation dispatching are compared.