Objective: In order to improve the energy efficiency of the transcritical two stage CO₂ refrigeration system, the conventional exergy analysis and advanced exergy analysis of the system were conducted. Methods: Advanced exergy analysis provides more valuable information on the interaction between system components and the potential for component improvement by splitting the exergy destruction into endogenous/exogenous and unavoidable/avoidable parts. Results: The results indicated that the transcritical two stage CO₂ refrigeration system had significant potential for efficiency improvement. The priority of the optimized components from conventional and advanced exergy analysis was different. The advanced exergy analysis showed that performance optimization of the high-pressure stage compressor, low-pressure stage compressor and evaporator were the focus of improving system energy efficiency. Conclusion: The endogenous avoidable exergy destruction of the high-pressure stage compressor, low-pressure stage compressor and evaporator accounted for 20.9%, 15.2% and 36.5% of the endogenous avoidable exergy destruction of the system, respectively. The improvement of the high-pressure stage compressor, low-pressure stage compressor and evaporator are able to reduce their exergy destruction by 58.8%, 49.3% and 90.2%, respectively. The conventional exergy analysis cannot provide such recommendations.