Air pollution reduction and climate co-benefits in China’s industries

Air pollution reduction policies can simultaneously mitigate CO2 emissions in the industrial sector, but the extent of these co-benefits is understudied. We analyse the potential co-benefits for SO2, NOx, particulate matter (PM) and CO2 emission reduction in major industrial sectors in China. We construct and analyse a firm-level database covering nearly 80,000 observations and use scenario simulations to estimate the co-benefits. The findings show that substantial co-benefits could be achieved with three specific interventions. Energy intensity improvement can reduce SO2, NOx, PM and CO2 emissions for non-power sectors by 26–44%, 19–44%, 25–46% and 18–50%, respectively. Reductions from scale structure adjustment such as phasing out small firms and developing large ones can amount to 1–8%, 1–6%, 2–20% and 0.2–3%. Electrification can reduce emissions by 19–25%, 4–28%, 20–29% and 11–12% if the share of electricity generated from non-fossil fuel sources is 70%. Since firm heterogeneity is essential to realize the co-benefits and directly determines the magnitudes of these benefits, stricter and sensible environmental policies targeting industrial firms can accelerate China’s sustainable transformation.