Reducing carbon emissions from the power sector is of great importance for China in moving towards a low-carbon economy. Key issues include how to scientifically analyze potential for reductions, identifying a feasible transition strategy, and developing effective policies and measures to achieve goals. Many studies have explored future CO₂ emissions from the power sector, but few have quantitatively analyzed factors associated with CO₂ emission reduction potential, and research has thus failed to propose targeted policy solutions. This study was built on a CO₂ emissions accounting model with a bottom-up approach. Factors that impact the CO₂ emissions, i.e., terminal electricity consumption, low-carbon power production, thermal power efficiency, and line loss rate, were included in the model. The LMDI method was used to measure the weight of the contribution from each factor. Three scenarios, i.e. a Business As Usual (BAU) Scenario, a Current Policy (CP) Scenario, and a Low-carbon (LC) Policy Scenario, were developed to stimulate emission reductions by the sector during the period 2015-2020. The study results reveal that CO₂ emissions from China's power sector will continue to grow under all three scenarios over the period of 2010 to 2020, with annual growth rates of 10.7% (BAU), 6.5% (CP) and 4.5% (LC). As the Current Policy Scenario was based on existing plans and policies for the power sector, we believe that it should be possible to achieve the 2701 Mt CO₂ emission reduction forecast under CP. As the Low-carbon Policy Scenario requires more radical policies to be adopted in the power sector, we believe that the forecast 3688 Mt reduction by 2020 (down to only 4720 Mt) is likely to be the upper limit of CO₂ emission reductions possible for the sector. By further studying all the factors that contribute to CO₂ emission reduction potential, we found that the most influential factor driving the growth of CO₂ emissions from the sector until 2020 is terminal electricity consumption. Low-carbon power generation will have growing importance in the period 2011-2020. For example, in the LC Policy Scenario, the contribution of low-carbon power generation to CO₂ emission reductions reached 29.7%, exceeding that of thermal power generation efficiency and all other factors, Thermal power generation efficiency will play an important role throughout the evaluated period. However, because the progress of technology may curb gradually with the growth of power generation efficiency, the contribution of this factor will decrease. The contribution made by the thermal power structure will increase owing to the rapid development of gas-fired power generation in the future. Compared to other factors, the line loss rate is not a great contributor to the total CO₂ emissions of the sector, but is still of significance that should not be ignored. Finally, policy recommendations are provided based on the results of the study to support government policy making for China's power sector.