The Impact of Carbon Emission Trading Scheme on Air Pollution in China

As the world's largest carbon emitter, China is also facing air pollution problems. Due to the homogeneity of carbon dioxide and air pollutants, control of carbon emission may have synergistic emission reduction effects on other air pollutants. Moreover, China's industrial sector is the largest contributor to both CO2 and air pollutants. Therefore, whether the emission trading scheme (ETS) has a synergistic emission reduction effect on industrial air pollution is critical to China's sustainable development. In this paper, I use Chinese industrial sulfur dioxide, industrial dust, and PM2.5 emissions data as an entry point and apply the PSM-DID method to explore the synergistic effect of ETS and air pollutant emission reduction in China. Some novel empirical findings emerge. First, ETS was effective in reducing PM2.5 concentrations in Hubei but the effect of ETS in Guangdong was not significant. Second, ETS had no significant effect on the industrial SO2 and industrial dust emissions in Guangdong and Hubei. I have also made policy recommendations for the national implementation of ETS: Improve the construction of the ETS institutional system, establish a carbon trading data disclosure platform, and establish a green GDP indicator.