Policy Coordination Effects of APPCAP and ETS on Pollution and Carbon Reduction

Coordinated control of pollution and carbon reduction is an imperative choice for China’s overall transition towards sustainability. However, China’s environmental policies often treat pollutants and CO2 separately, potentially resulting in imbalanced pollution and carbon reduction. Since several cities are not only critical cities for the Air Pollution Prevention and Control Action Plan (APPCAP) policy but also pilot cities for the Carbon Emissions Trading Scheme (ETS), this study aims to examine the extent to which the policy coordination of APPCAP and ETS can influence air pollutants and CO2 emissions. Using panel data from 2011 to 2019 for China’s 231 prefecture cities, we compare the pollution and carbon reduction effects of separate and coordinated policy implementation of APPCAP and ETS via the difference-in-differences (DID) model and the causal forest model. Research shows that (1) the policy coordination of APPCAP and ETS has significantly reduced both air pollutants and CO2 emissions in dual-policy pilot cities. For non-dual pilot cities, the separate implementation of APPCAP or ETS only exerts significant unilateral effects. (2) Enhancing government supervision, weakening the relationship between government and enterprises, and raising enterprises’ green innovation capabilities are the main mechanisms through which policy coordination can significantly influence pollution and carbon reduction. (3) The combined implementation impacts of APPCAP and ETS are more evident in pollution-intensive cities and cities with weak carbon-peaking trends. Our research inspires the development of a collaborative system of pollution reduction and carbon reduction policies.