Impacts of carbon trading scheme on air pollutant emissions in Guangdong Province of China

• We assessed air pollutant emissions embedded in carbon emission trading scheme (ETS) among four sectors in Guangdong China
• Carbon ETS has significant co-benefits of reducing SO2 and NOx emissions.
• ETS could reduce the economic costs of achieving energy saving and CO2 emission target
• Emission trading could reduce the economic costs of achieving energy saving and CO2 emission target

This study aims to assess the impacts of carbon emission trading scheme (ETS) policy on air pollutant emission reduction in Guangdong (GD) Province, especially with respect to the embedded air pollutant emission flow caused by carbon ETS. A Computable General Equilibrium (CGE) model is constructed to project the local emission trajectory of CO2 and air pollutants under business as-usual (BaU) and policy scenarios in GD province and the rest of China from 2007 to 2020. To achieve the energy and carbon intensity targets, the carbon constraint and ETS policy are employed to promote energy saving and CO2 emission reduction. The simulation results show that the carbon ETS has the co-benefits of reducing SO2 and NOx emissions by 12.4% and 11.7% in 2020 compared with the BaU scenario. Along with the carbon trading volume of 633 million tons created by the ETS scenario, an embedded amount of 38,000 tons of air pollutants is exchanged among carbon trading sectors, which valued about 50 million USD. Although the current carbon and air pollutant emission markets are independent from each other, the evaluation of the co-benefits needs to be considered further in the policy making process.