Have the pilot carbon markets achieved synergistic control of carbon abatement and pollution reduction? The quasi-experimental evidence from China

The Chinese government has emphasized the necessity of synergistic control for carbon abatement and pollution reduction in the protection of eco-environment, as part of the 14th Five-Year Plan and the Long-range Objectives Through the Year 2035. As an important tool to reduce CO2, the carbon market can also affect the air pollution synergistically. The study utilizes the multi-period difference-in-difference (DID) model to analyze the impact of carbon market on carbon abatement, as well as the synergistic effect on different air pollutants. The study analyzes the mechanisms for carbon market to achieve synergistic control from the perspectives of "quantity" and "category" comprehensively. The findings indicate that: (1) carbon markets can reduce CO2 significantly, with a synergistic effect mainly observed on SO2 and soot (dust). These results remain robust when focusing on the industrial sector or adopting the PSM-DID estimation, etc.; (2) the mechanisms to achieve synergistic control vary among different air pollutants. Promotion of technology can only synergistically reduce SO2. Optimization of energy consumption structure is the top priority for reducing CO2. The most effective mechanism to achieve synergistic control of air pollutants is improvement of energy utilization efficiency; (3) to achieve synergistic control goals, the Chinese national market should prioritize industries that release both CO2 and NOx in the rolling-out plan, enrich the trading tools, and formulate effective price signals.