A generation right exchange theory based on energy saving and emission reducing is proposed aiming to improve the overall energy utilization efficiency and promote energy saving as well as emission reducing. The theory considers the current policy on energy efficiency and emission reduction in China. Its objective is to optimize the overall social benefit with maximum energy trading quantity while maintaining the least energy consumption， pollutant emissions and losses. It also considers other factors such as nodal locations. The basic connotation of generation right exchange， the effects or potential and economical benefits of energy-saving and emission-reducing are given and analyzed. The coordination between the bilateral contract and pool market mechanisms for generation right exchange are proposed. Ten mathematical models and algorithms for generation right exchange are designed， with each model's characteristics analyzed and compared.