Achieving　the　co-benefits　of　carbon　emissions　reduction　and　air　pollution　control　is　significant　for　pursuing　a　sustainable　and　low-carbon　economy　in　China.　This　study　applies　the　difference-in-differences　method　to　explore　the　local　and　spillover　impact　of　the　carbon　emissions　trading　policy　(2011)　on　China＇s　carbon　emissions　and　air　quality,　based　on　city-level　data.　The　results　show　that　the　carbon　emissions　trading　policy　significantly　affects　the　co-benefits　of　the　total　carbon　emissions　reduction　and　air　quality　improvement.　In　addition　to　this　direct　effect,　the　carbon　emissions　trading　policy　could　indirectly　affect　carbon　emissions　and　air　quality　by　changing　the　innovation　ability　of　cities　and　location　choice　of　local　industries.　Though　the　policy　does　not　significantly　affect　the　overall　carbon　emissions　intensity　in　China,　it　is　seen　to　be　effective　for　Central　China.　Our　further　spatial　analysis　indicates　that　the　policy　increases　the　carbon　emissions　in　neighboring　cities,　which　supports　the　＂pollution　haven　hypothesis.＂　Thus,　this　study　contributes　to　the　existing　climate　policy　literature　and　provides　a　more　comprehensive　picture　of　the　policy　effect　by　integrating　the　co-benefits　of　the　carbon　emissions　reduction　and　air　pollution　control,　estimating　both　local　and　spillover　effects　and　exploring　the　underlying　mechanisms.