China’s factories cut pollution and carbon together, saving billions in abatement costs

China’s industrial sector has long carried a double burden: it is the engine of the world’s largest manufacturing economy and one of its largest sources of carbon dioxide and air pollutants. For years, policymakers treated these problems separately, with scrubbers and filters targeting smokestack emissions while carbon policies evolved along a different track. A new study published in Clean Technologies and Environmental Policy argues that this separation is not just administratively awkward but economically wasteful, and it puts a number on the waste: when pollution reduction and carbon reduction are optimized together rather than separately, the combined marginal abatement costs fall by an average of 35.59 percent across thirty Chinese provinces.

The research, led by Zhiyuan Gao of the Beijing Institute of Petrochemical Technology together with colleagues including Yu Hao of the Beijing Institute of Technology, tackles a question that has resisted quantitative answers despite a decade of policy attention. China’s government has formally promoted the coordinated reduction of pollution and carbon emissions, often abbreviated as PCR, as a pillar of industrial decarbonization. Yet the efficiency-side synergy, meaning how much cheaper it becomes to abate both pollutants jointly rather than one at a time, had never been measured systematically at the provincial level. The team’s answer draws on an unusual marriage of production-frontier economics and circular economy theory, and it delivers the first national, regional and provincial decomposition of this synergy using the Dagum Gini method.

Technically, the study constructs a non-radial directional distance function, or NDDF, coupled with dual-cost shadow pricing. The NDDF is a way of mapping each province’s industrial system as a production technology that consumes labor, capital and energy to produce industrial output alongside three undesirable byproducts: carbon dioxide, sulfur dioxide and industrial particulate matter. Rather than treating these pollutants in parallel frontiers, as most earlier work did, the researchers place carbon and air pollutants within a single production frontier. This matters because the frontier defines how far each province sits from the best achievable performance, and the shadow prices derived from the frontier give the marginal abatement cost, the extra cost of removing one more ton of each pollutant. When the marginal abatement costs of carbon and pollutants are computed jointly, the total is lower than when each is computed alone, and that proportional reduction is what the authors define as PCR synergy.

The synergy metric is then given a theoretical interpretation that elevates it beyond a bookkeeping exercise. The authors read PCR synergy as the efficiency signature of progress along the reduce, reuse, recycle and regenerate hierarchy of circular economy theory, the so-called 4R ladder. In this framing, regeneration is not a vague aspiration but an operational concept: it denotes the systemic capacity of an industrial system to lower joint emissions by restructuring its energy and material throughputs, rather than by bolting on end-of-pipe abatement equipment. A province whose factories reuse waste heat, recycle materials and restructure energy inputs moves up the 4R hierarchy, and its joint abatement becomes structurally cheaper. The synergy percentage, in other words, measures how much of the abatement burden has been absorbed by circular restructuring rather than paid for in conventional abatement spending.

The empirical core is a balanced panel of thirty Chinese provinces spanning 2011 to 2021, drawing on provincial carbon accounts and environmental statistics. Four headline findings emerge. First, the national average PCR synergy is 35.59 percent, but its composition is shifting. The carbon reduction component rose from 29.75 percent to 31.65 percent over the decade, while the pollution reduction component declined from 41.76 percent to 36.77 percent. This crossover is significant: it suggests that in the early years, joint savings came mostly from cheaper pollution control, whereas by the end of the period, carbon-side restructuring was doing more of the work, consistent with the maturing of circular economy features in provinces that have moved furthest along the 4R hierarchy.

Second, the Dagum decomposition of inter-provincial disparity delivers a surprise that cuts against conventional wisdom about China’s regional economics. Transvariation intensity, the component of inequality that arises from overlapping distributions rather than between-group differences, accounts for 53.13 percent of the total inter-provincial disparity in synergy. In plain terms, high-synergy and low-synergy provinces are scattered across the map rather than clustered neatly in the wealthy coastal East, the transitional Center and the developing West. The traditional East-Center-West partition, which organizes so much of Chinese regional policy, does not map onto the geography of pollution-carbon synergy. Synergy clusters cut across income levels and industrial structures, implying that policy tailored to broad regional blocs will miss the provinces where targeted intervention would pay off most.

Third, the team ran counterfactual scenarios to test how much synergy could be gained under alternative policy regimes. Under an ecological priority scenario, in which environmental objectives are weighted more heavily in the optimization, synergy rises by 11.99 percentage points above baseline. Under an energy revolution scenario, which restructures the energy mix, synergy rises by 11.68 percentage points. The near-equality of the two gains is itself informative: neither a purely environmental push nor a purely energy-sector transformation dominates, and the largest joint savings likely require elements of both. For policymakers weighing where to spend political capital, the results suggest that ecological priority and energy revolution are roughly interchangeable levers on the efficiency side, at least over the horizon the data cover.

Fourth, the study finds that the source of synergy differs by provincial industrial structure. Provinces with structural circular economy features, such as developed recycling systems and restructured material throughputs, show higher carbon-driven synergy, meaning their joint savings come mainly from cheaper carbon abatement enabled by circular restructuring. Coal-heavy provinces, by contrast, retain larger pollution-side latent synergy, but that latent potential is contingent on structural adjustment. In other words, the coal provinces have not yet realized their pollution-carbon savings because the underlying energy and material structure has not changed; the potential is there, waiting for the transition. This asymmetry gives the synergy metric a diagnostic value: it tells each province not just how much synergy it has but which kind, and therefore which lever to pull.

The methodological contribution deserves attention from specialists. Integrating carbon dioxide and air pollutants within a single NDDF production frontier rather than parallel frontiers changes the economics of the estimates, because it allows the technology to trade off abatement across pollutants. The dual-cost shadow pricing then converts frontier distances into marginal abatement costs for each of the three pollutants, giving the synergy measure a firm cost interpretation. Earlier studies of pollution-carbon co-benefits in China, including work based on marginal abatement costs and on provincial synergy assessments, generally treated the two objectives with separate efficiency measures or focused on single pollutants. The present study’s single-frontier approach, combined with the first national-regional-provincial Dagum decomposition of PCR synergy, sets a new benchmark for how co-benefit efficiency should be quantified.

The broader implications reach beyond China. The operational definition of regeneration supplied by the authors gives circular economy theory a measurable target: a system is regenerating to the degree that its joint emissions fall through restructured throughputs rather than end-of-pipe spending. For any industrial economy pursuing decarbonization, the message is that pollution control and carbon policy are not parallel bureaucracies but two faces of the same production technology, and the savings from treating them as such are large, measurable and growing. As China’s provinces continue along the 4R hierarchy, the composition of synergy will keep shifting from pollution-side to carbon-side, and the provinces that restructure fastest will capture the largest savings first. The study’s data are available upon reasonable request from the corresponding author, and the authors declare no competing interests.

Subject of Research: Quantifying pollution–carbon reduction synergy and circular economy transition pathways in China's industrial sector

Article Title: From emissions to regeneration: integrated pollution–carbon mitigation and circular transition pathways in China’s industrial sector

Article References: Gao, Z., Jia, Z., Gao, S., Tang, H., Afthanorhan, A., & Hao, Y. (2026). From emissions to regeneration: integrated pollution–carbon mitigation and circular transition pathways in China’s industrial sector. Clean Technologies and Environmental Policy, 28(11), Article 280. https://doi.org/10.1007/s10098-026-03564-y

Image Credits: AI Generated

DOI: 10.1007/s10098-026-03564-y

Keywords: China, industrial sector, pollution-carbon synergy, circular economy, marginal abatement cost, decarbonization, emissions, regeneration, integrated, pollution, carbon, mitigation