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. Energy intensity improvement, scale structure adjustment and electrification measures in major industrial sectors can substantially and simultaneously reduce CO2, NOx, SO2 and particulate matter emissions.