Abstract

We discuss implications of air quality co-benefits for climate policy in the European Union (EU). With a 10% share of global greenhouse gas emissions and a large share of its urban population exposed to levels of air pollution considered unsafe by the World Health Organization, climate stabilization and air quality improvements are two major policy challenges in the EU. While these two environmental pressures both largely stem from the same activity, the combustion of fossil fuels, they have been regulated separately in the past: The main climate policy in the EU is the EU Emissions Trading Scheme, a classical cap-and-trade program, whereas air pollution has been regulated mainly through emissions standards and technology requirements. However, climate policy not only reduces global climate change, it also improves local air quality. Incorporating air quality co-benefits into an assessment of European climate policy highlights, first, that the benefits of climate policy are vastly underestimated if co-benefits are omitted from the analysis, and substantial increases in carbon prices can be justified based on co-benefits alone. Second, socioeconomically disadvantaged neighborhoods are usually more exposed to co-pollutants, both within and across countries, and benefit more from air quality improvements caused by fossil fuel abatement. This adds a new dimension to debates on the distributional effects of climate policy.