Has Carbon Emissions Trading Reduced PM_2.5 in China?

Area of Science:

• Environmental Economics
• Air Quality Management
• Public Health

Background:

• China faces a dual challenge of developing low-carbon policies while mitigating local air pollution.
• The national Emissions Trading Scheme (ETS) was implemented to address carbon dioxide (CO2) emissions.

Purpose of the Study:

• To quantify the extent to which China's ETS has generated co-benefits by reducing PM2.5 concentrations.
• To analyze the spatial spillovers and economic impacts of the ETS on air quality.

Main Methods:

• A difference-in-differences model was employed.
• Monthly PM2.5 concentration and weather data from 297 Chinese cities (2005-2017) were analyzed.
• Robustness checks included propensity score matching, Mahalanobis distance matching, and placebo tests.

Main Results:

• China's ETS reduced PM2.5 concentrations by 4.8%, with the strongest effect observed in summer.
• Positive spillover effects on neighboring non-pilot cities were identified, particularly downwind.
• Co-benefits were greater in regions with higher carbon trading volume and prices.
• The ETS may have avoided 23,363 deaths and saved $41.38 billion annually in GDP.

Conclusions:

• China's ETS effectively reduces PM2.5 pollution, offering significant public health and economic advantages.
• The policy's effectiveness is influenced by trading volume and price, with notable spillover effects.
• The ETS serves as a crucial tool for achieving both climate and air quality goals in China.