Abstract: CO₂-enhanced oil recovery (EOR) technology has been widely applied to various oil reservoirs. However, there are few studies on CO₂-enhanced gas recovery (EGR) and the sequestration capabilities of carbonate gas reservoirs with edge water in China. To understand the EGR mechanisms and CO₂ sequestration potential within carbonate gas reservoirs with edge water, this work used numerical simulation techniques to model CO₂ flooding performance in the M carbonate gas reservoir with edge water. First, wells suitable for CO₂ injection were selected. Second, CO₂ flooding plan was designed for the M carbonate gas reservoirs with edge water. Based on the optimal plan, the cumulative natural gas production and CO₂ sequestration performance were predicted. Finally, the mechanisms of EGR and CO₂ sequestration in carbonate gas reservoirs with edge water were revealed. Results showed that the optimal plan consisted of three injection wells and seven production wells. The gas injection rate for the total M reservoir area was set at 22.5×10⁴ m³·d^–1, with a total injection volume of 16×10⁸ m³ during the gas flooding stage. The shut-in time was established based on the mole fraction of CO₂ in the production well, which was targeted to reach 10%–30%. The gas production rate for the entire area is maintained at 22.5×10⁴ m³·d^–1, with the optimal gas drive plan spanning 19.5 years. Remarkably, the recovery was 84.5% under this plan. Several conclusions were drawn from this study. First, following injection, CO₂ diffuses from the injection well towards the periphery of the reservoir, moving from higher to lower elevations. This diffusion process led to an increase in gas density within the formation. Water saturation near the injection well exhibits a decreasing trend, and the gas-water interface decreases significantly (50–100 m), which can effectively suppress the invasion of edge water. Second, the effective CO₂ sequestration capacity is predicted for 14.29×10⁶ t under the optimal plan. This total capacity is comprised of supercritical sequestration (13.56×10⁶ t), solution sequestration (0.53×10⁶ t), and mineral sequestration (0.20×10⁶ t). The minor error between the numerical simulation results and the mathematical model predictions further validated the accuracy and reliability of the findings. The results of the present study are significant. The M gas reservoir exhibits significant potential for CO₂ EGR and storage. The findings provide scientific guidance for the efficient development of carbonate gas reservoirs with edge water and offer crucial data support for the application of carbon emission reduction technologies. In conclusion, CO₂ EGR and sequestration in carbonate gas reservoirs with edge water can maximize economic benefits and contribute towards achieving the dual-carbon target.