Provincial economic and air quality-related health impacts of China’s potential partitioned carbon regulation

China has launched the national emissions trading system (ETS) and intends to form a novel mechanism to control provincial carbon emissions. While previous studies have separately analyzed the impacts of ETS and provincial reduction targets on welfare and air quality, how the potential integration of these approaches would impact welfare and air quality-related health remains underexplored. In this study, we employ an integrated modeling framework to compare the economic impacts and health outcomes associated with PM_2.5 and ozone under three provincial control mechanisms, all targeting the same national total carbon emissions in 2035. Our findings indicate that ETS improves national welfare by at least 0.12% compared to the conventional provincial control mechanism (PRO_CAP). The partitioned carbon regulation mechanism (PART_REG), which applies national ETS to power and energy-intensive industry sectors while assigning reduction targets to other sectors at the provincial level, achieves 85% of the welfare improvement observed under an ideal mechanism with comprehensive ETS coverage (FULL_ETS). Compared to PRO_CAP, ETS redistributes CO₂ and co-emitted air pollutant emissions from northern to southern China, improving air quality in northern provinces but worsening it in central and southern provinces. National premature deaths increase by 32,700 (95% CI: 23,200—41,600) and 44,800 (95% CI: 31,400—57,600) under the PART_REG and FULL_ETS scenario, respectively, compared to the RPO_CAP scenario. When comparing the changes in welfare and monetized health impact, ETS remains cost-effective nationally compared to RPO_CAP, with a median net benefit estimate of US$6.6 billion under the PART_REG—20% larger than that under the FULL_ETS. The northern and southeastern coastal provinces experience net positive benefits, while some central provinces face net negative benefits.