Gearing Carbon Trading Towards Environmental Co-benefits in China

The Chinese government plans to adopt a nationwide carbon market by 2017. Given the local effects of co-pollutant emissions, the trading of carbon dioxide emissions between facilities to meet global objectives may improve or worsen local air quality and public health. To gear carbon trading toward maximum environmental co-benefits, a quantitative model based on facility-level carbon dioxide emissions, air pollution dispersion and concentration-response functions is proposed and applied to the Beijing-Tianjin-Hebei. The results show that the polluters with the highest Population Health Damage Intensity (PHDI) are medium-sized facilities, because larger facilities either employ more effective pollutant control technologies or are located farther away from densely populated areas. Using this modeling framework, key facilities, sectors and regions can be identified for maximizing the environmental co-benefits from introduction of carbon market and avoiding undesirable environmental damage.